When you decide to buy a house, the very first thing you start saving for is the down payment. However, many first time buyers get an unwelcome surprise when their lender hands them an estimate that includes an extra charge called "closing costs."

Closing costs are the various transaction fees required to legally transfer the property from the seller to you. In California, buyers can generally expect their closing costs to run between 2% and 5% of the purchase price. On a $450,000 home, that means you need to budget an additional $9,000 to $22,500.

The good news is that you do not have to pay for everything. Closing costs are split between the buyer and the seller. While everything in real estate is negotiable, Butte County has standard customary practices for who pays what. Here is a quick breakdown of what you can expect.

What the Buyer Typically Pays For As the buyer, most of your closing costs are tied directly to your mortgage.

• Loan Origination Fees: This is the fee your lender charges to underwrite and process your loan.

• Appraisal Fee: The bank requires a professional appraisal to ensure the home is actually worth what you are paying for it. This usually costs around $500 to $700.

• Prepaid Taxes and Insurance: Your lender will collect a few months of property taxes and a full year of homeowners insurance upfront to fund your escrow account.

• Title Insurance (Lender's Policy): You will pay for a title policy that protects your bank in case there are any legal disputes over the property line or ownership.

What the Seller Typically Pays For Sellers carry a significant portion of the transaction costs in our market.

• Real Estate Commissions: The seller generally pays the commissions for both the listing agent and the buyer's agent out of their equity.

• County Transfer Tax: In Butte County, the seller customary pays the documentary transfer tax, which is a fee charged by the county to record the change of ownership.

• Title Insurance (Owner's Policy): While the buyer protects the lender, the seller customarily pays for the owner's title policy to guarantee they are giving you a clean, legally clear title to the home.

What We Split 50/50

• Escrow Fees: The escrow company acts as the neutral third party that handles the money and the paperwork. In Butte County, it is customary for the buyer and the seller to split this fee right down the middle.

How to Lower Your Out of Pocket Costs If saving for both the down payment and the closing costs is stretching your budget too thin, we have strategies to help. In a balanced market, we can negotiate a "seller credit." This is where we ask the seller to pay a percentage of your closing costs on your behalf.

Do not let the fear of hidden fees stop you from buying. If you want to see a realistic estimate of exactly what it would cost to buy a home in Chico right now, let's talk.

Sources

Bankrate

Zillow

Old Republic Title