Closing Costs

Closing costs are basically out-of-pocket fees that are charged on top of a home's sale price. They are used to cover services involved in the purchase such as preparing the paperwork, legal fees, filing your application, paying your agent, and getting home insurance. In Laguna Beach real estate, closing costs usually fall between 1% and 4% of the home value.

First-time home buyers are often caught off-guard with closing costs. Many have gone well over their budget because they failed to take closing costs into account. A good agent can give you a good idea of what costs to expect and how you can minimize them. Read on for quick guide to Laguna Beach closing costs and what they're used for.

Types of Closing Fees

Closing costs can be classified into recurring and non-recurring fees. Recurring fees are those you pay on a regular basis after you've moved in. These are usually maintenance and insurance costs, which are standard requirements for Laguna Beach real estate. Non-recurring fees are one-time payments made at the closing table, usually for documentation and legal fees involved in the sale.

Recurring Costs

• Fire and flood insurance. These are monthly premiums you pay to keep you covered in case your home is damaged by fire or flood. Some insurance programs also cover other natural disasters, but these two are required in most areas.

• Mortgage insurance. This provides a measure of security for both you and your lender in case you are unable to repay the loan due to illness, disability and other valid causes. You can take out mutual or private mortgage insurance, depending on what's agreed upon.

• Prepaid interest. This is part of the interest which covers the period between the day you buy the home and the first 30-day mark on your mortgage.

• Property taxes. You usually pay a pro-rated tax for the partial year you will be occupying the home. Afterwards, you will pay annual taxes based on the estimated value of your home.

Non-Recurring Costs

• Title search  and insurance. Buyers may have to conduct (or pay for) a title search to make sure the home they're buying has clean title, with no obligations such as liens or unpaid property taxes. Most title companies will also issue title insurance so that you're safe from any claims once you own the home. You can arrange to split the title costs with your seller.

• Appraisal fee. This is paid to local authorities who verify the home's sale price and make sure it meets the current average for Laguna Beach homes for sale.

• Survey fee. This covers the costs of surveying the land where the property sits, to make sure it matches the measurements stated in the paperwork.

• Inspection fee. Most Laguna Beach homes have to be inspected by a professional to check for pests, construction flaws and other potential problems. The costs may be shouldered by either you or the seller, or split between both parties.

• Escrow. This is a fee paid to your lender for temporarily holding part of your monthly payments, including taxes and insurances, until they become due.

• Attorney fees. Laguna Beach homes entail a lot of legal documentation, and attorney fees are paid to the lawyers who make sure they're properly prepared. The costs can also be split between both parties.

• Recording fees and transfer tax. Once you've bought the home, you'll have to report the change of ownership to Laguna Beach real estate officials. Recording fees cover the costs of changing the file and putting your name on public record. The transfer tax is simply a transaction fee, paid either by you or the seller, for transferring the title to the buyer.