The Housechick Blog

When you buy a house in Tucson - or just about anywhere - there are lots of people that provide services to you, from the lender and the appraiser to the tile insurer and the guy that carries the documents down to the city to be recorded.  Naturally, all of these people want to be paid to help you complete your house purchase.  If you add up all those payments to service providers, that’s what we call closing costs.

Closing costs is money paid at the very end of the home buying process.  In Tucson, you’ll probably bring a cashier’s check to the Escrow officer when you come to sign your closing documents.  That’s the check that pays for your down payment and your closing costs.

I’m not going to address your down payment here - it will vary widely depending on what loan program you’ve chosen.  But keep in mind as you read on that the closing costs described here are in addition to your down payment.  Also bear in mind that is is incredibly common to ask a Seller to assist you in paying your closing costs. 

A fast and dirty rule of thumb is that closing costs are roughly 2-3% of the purchase price.  Your agent should be able to provide vastly better estimates than that.

Okay.  So traditionally when you buy a home in Tucson and you get a loan, you pay for all of your own loan costs.  A Seller will typically expect a Buyer to pay for their own appraisal, the secondary title policy (that’s coverage especially for the lender), any origination fee, or discount points paid, things like that.  This is the most difficult part of your closing costs for your agent to estimate, because lenders charge vastly different things!  When you talk to lenders to get pre-approvals, make sure you get Good Faith Estimates, so that when you and your agent start to estimate your closing costs, you can be as accurate as possible by looking at the numbers on the Good Faith Estimates.

Next, the title insurers and the escrow officers want to be paid for providing those services.  Their costs are based off of the purchase price and the loan amount.  Around here, the escrow portion of that fee is usually split 50/50.

Then there are your taxes and impounds.  Impounds are easier to explain.  Your lender wants to make sure that your homeowner’s insurance and your real estate taxes are paid and paid on time, so they’re going to collect a portion of that from you up front.  Usually, you’ll pay one year plus a 2 month proration of your homeowner’s insurance cost as part of your closing costs.  Due to the way lenders calculate and collect interest, you’ll also pay the interest due on your loan from between the day you close and the last day of the month (this is why many people want to close at the end of the month!).  For example, if you close escrow on the 15th of November, then there are 15 more days left in the month, so the lender will collect 15 days worth of interest up front.

The real estate tax costs are sometimes hard to understand, and really deserve a post to themselves.  For now, let’s say that the amount of real estate taxes that are collected up front will depend on the month that you close.  You may have to bring in anywhere from one to 5 months worth of real estate taxes up front.

Finally, there’s some miscellaneous costs.  If you’re buying a house with a Homeowner’s Association, then there might be some fees associated with that.  The Recorder’s office charges to record your documents.  There’s a courier that takes all your signed documents downtown, and there’s some FedEx charges to send your documents back to your lender.

It is important to budget for closing costs when thinking about buying a home.  Gather up your Good Faith Estimates when you talk to your agent, and have them run some estimated costs sheets for you.  No one wants surprises at the end!  Better know what you’re getting into up front.

One last thing - on the Good Faith Estimates, your lender has probably estimated your closing costs.  These aren’t necessarily accurate.  Your agent probably has the best idea of costs for your specific situation, but will need to see your Good Faith Estimates to glean the lender’s costs and add that to their calculations.  Don’t be surprised if you find very different closing cost numbers on your agent’s estimations than on your lenders.