Buyer Closing Costs in Philadelphia — Essential Guide

Even after spending months to years saving for a down payment to buy a home, some Philadelphia buyers may not be prepared for the added expense of closing costs. These extra costs can pile up quickly and may come as a surprise when starting your home search.

To help buyers prepare for the many expenses that come with a home purchase, we’ve outlined common closing costs Philadelphia homebuyers need to factor into their budget.

How much are closing costs in Philadelphia?

Buyers should expect to pay between four and six percent of their purchase price for closing costs when purchasing a home in Philadelphia. Yes, this sounds like a lot, but it is very common for closing costs to be high in major metropolitan cities. 

What are the typical buyer closing costs in a Philadelphia home purchase?

• Realty Transfer Tax — Pennsylvania & Philadelphia
• Title Insurance
• Loan Origination & Underwriting Fees
• Appraisal Fee
• Home Inspection Fee
• Homeowner’s Insurance

Realty Transfer Tax

The largest closing costs when purchasing a home in Philadelphia are the realty transfer taxes. 

The Commonwealth of Pennsylvania collects 1% while the City of Philadelphia collects 3.278% for a  total of 4.278%. Luckily, it is customary (but not legally required) for the buyer and seller to split the transfer taxes evenly. 

In most cases, the buyer will pay 2.139% and the seller will pay 2.139%. The rare exception is if you purchase a foreclosure, in which case you would likely pay the full 4.278%. Realty transfer taxes are payable when a property deed is filed with the State Records Department. 

Title Insurance

If you are purchasing a home with a mortgage you will need to get title insurance as the bank will require it. The cost varies depending on the provider, but current estimates range from 0.5% to 0.75% of the purchase price for your title insurance premium in Philadelphia. 

Title insurance protects buyers and lenders against claims on the title of your property prior to your ownership of the home. Liens or unpaid property taxes against the property are two potential issues that title insurance protects you (and your bank) against. While it might seem pricey, a mortgage company is unlikely to lend you money without it.   

Loan Origination & Underwriting Fees

The loan origination fee and underwriting fees are administrative fees for processing your application and all the necessary review. These fees usually range between 0.5% and 1% of your total loan amount.

There are many moving parts behind-the-scenes when banks review mortgage applications, and the loan origination and underwriting fees are meant to cover those activities. Be sure to ask about fees in advance so that you know what to expect before choosing a lender. 

Appraisal Fee

Mortgage lenders or banks require an appraisal before moving forward with a home loan. The reason for this is that your home will serve as collateral for the mortgage. Lenders will want to see that the property appraises for at least the purchase price. The cost of an appraisal in Philadelphia will typically range between $400 to $700 depending on the appraisal company the lender uses.

Home Inspection

It is always recommended to get an inspection when purchasing a home. A professional, licensed inspector will help you rule out any major issues with the property before buying. 

Home inspections cost between $300 and $1,000. The high end of the range occurs if you need special systems tested or inspected. However, it is safe to budget for $500.

Homeowner’s Insurance

Several factors affect the cost of homeowner’s insurance. They include the price of the home, size of your mortgage, deductible amounts, liability coverage, and replacement cost of your home. 

Get some quotes from local insurance agents to get a sense of what to expect, and what each coverage amount entails. The premiums can vary widely ranging from $750 to well over $2,000 depending on the coverage you need.

How can buyers offset these closing costs?

Unfortunately, closing costs are simply part of the home buying process. Buyers should do their homework so they are prepared when it comes time to make an offer on their dream home. 

You can offset a large portion of your closing costs by getting a commission rebate from your buyer’s broker. Prevu, a digital home buying platform, rebates a portion of the broker's commission it receives representing buyers.

The concept of a commission rebate is when a buyer's broker gives you a portion of their commission as a refund when they represent you on a purchase. Plus, commission rebates are legal in 40 US states including Pennsylvania.

Prevu’s Smart Buyer™ Rebate is the largest commission rebate available in Philadelphia. In addition, buyers benefit from a seamless online buying experience and the advice of an expert realtor with you every step of the way. You receive up to 1% cash back on your purchase with Prevu, which certainly will help with closing costs.

How to estimate your closing costs

You don’t have to simply rely on a checklist. Ask your realtor and mortgage professional questions early in your home search. They will both be able to  give you an itemized breakdown of estimated closing costs based on factors such as your budget, average tax amounts, local service fees, etc. This enables you to better prepare for your purchase.

Buyer Closing Costs Philadelphia Home ($750,000 purchase price, 20% down payment)

• Pennsylvania Realty Transfer Tax — $3,750
• Philadelphia Realty Transfer Tax — $12,293
• Title Insurance — $3,750
• Home Inspection — $500
• Appraisal Fee — $600
• Loan Origination & Underwriting Fees — $4,500
• Homeowner’s Insurance — $2,200
• Total — $27,593

Note: The above example assumes the buyer and seller evenly split the realty transfer taxes.

 

---

Prevu is the real estate technology company on a mission to save people money when they buy a home. Our Smart Buyer™ Rebate makes it possible for homebuyers to save when they buy a home with a seamless, end-to-end buying experience and the expert advice of a dedicated, salaried agent.