What are the closing costs of a house in California? What there is to know

Pop some champagne. Let it rain confetti from the rafters. You just bought your first home and you should be proud.

You’ve accomplished something less than half the people of LA County have done. The US Census Bureau reports that approximately 46% of LA County residents own their homes; that’s a tragically low number, but it makes your purchase all the more impressive.

However, we wouldn’t even bother to write this section if the job was done. Take the time to celebrate, but after that, reevaluate your new financial realities — your future homeownership expenses as well as any closing costs that may have cost you more than you expected.

Hidden costs

Across dozens of interviews with first-time home buyers, a recurring theme emerged: Many have underestimated the cost of the home buying process and owning a home above. beyond the mortgage. Your down payment and closing costs may have used up most of your savings, but if possible, plan to put some extra cash aside for the hidden costs of home ownership.

These are the most common costs that come with buying a home.

Closing costs

“Closing costs” is the catch-all term for all the costs associated with closing a home. They are owed to your lender and can vary wildly from state to state and lender to lender, but generally include loan application fees, appraisal fees, origination fees loan, closing costs, underwriting fees and courier fees.

Additionally, they may include a year of home insurance and several months of property taxes. That’s not necessarily a bad thing, as eliminating them early can help make the first year of ownership a little smoother.

“Closing costs end up being double or even triple what you originally expected,” said Courtney Northrop, who bought a bungalow in North Hollywood in January with his wife.

California closing costs in the first half of 2021 averaged $8,219 (or $5,773 not including taxes), according to real estate data firm ClosingCorp. This is the ninth highest average in the country and $1,382 higher than the national average. As a percentage of sale price, closing costs in California are on average significantly lower than in the rest of the United States, but that’s mainly because housing prices there are so high.

Emergency repairs

The inspection report may be clean, but that doesn’t mean your new home is spotless. Here is an example.

Suppose the previous owner renovated the house and added a few hundred square feet, but despite creating a bigger house, he did not improve the heating and air conditioning system. When summer weather arrives, the system will not be equipped to serve the whole house, so it is more likely to fail in a few years. Replacing an HVAC system can cost $20,000 or more – and it’s just one of the things you can expect to replace at some point.

Other emergency repairs arise due to aging plumbing, roof damage, electrical problems, old appliances, or a broken water heater. These issues are all expensive, so if possible, keep a few thousand dollars in the bank.

Global warming is real and summers will continue to get hotter, straining the power grid and forcing utilities to shut off power to fire-prone areas. Power outages will likely become a part of life over the next decade, so real estate agent Bret Parsons of Compass says you should consider installing a generator. Depending on the size, the device can cost between $2,000 and $25,000. But if there’s someone in the house who needs access to electrical medical equipment, having that power could make a huge difference.

HOA fees

One of the most rude awakenings when transitioning from tenant to buyer is homeowners association fees. Like a miniature rent payment each month, the fee is standard for condos and townhouses (and even in some single-family neighborhoods), and it goes toward community amenities like a community pool and tennis courts. tennis or services such as pest control. and garbage removal.

Check to see if your neighborhood charges HOA fees, and if so, set aside a few hundred a month because the LA metro area has — you guessed it — some of the highest average HOA dues in the country. Although standard fees range from $200 to $300 nationwide, the Los Angeles average is $340, good for the 13th most expensive fare in the country, according to data from Zillow and the US Census Bureau.

For high-end condos, HOA dues can skyrocket. Monthly dues for Century City’s luxury Century building run north of $5,000, and fees for Beverly West, a boutique high-rise near the Los Angeles Country Club, can reach more than $8,000 per month. month.


The owner is no longer within reach of the phone. When something breaks – and something is sure to break – it’s a good idea to have some money set aside for repairs. Here are some common items that you will need to replace, along with estimates of replacement cost and frequency.


It may seem overwhelming when you first buy a property, but renovating the home not only makes it yours, it adds value down the road if you ever want to sell. The pandemic has led to labor and supply shortages, making renovations much more expensive. But in a steady market, here’s a general idea of ​​how much you can expect to spend on major changes.

“Let’s be honest, ‘affordable’ homes aren’t turnkey and require a lot of work to just be habitable. In today’s LA housing market, you might be looking at an $800,000 to $900,000 home that will likely require another $100,000 in structural and cosmetic work,” Northrop said. “And a big chunk of your renovation budget will usually go to what inspections find, if you’re not lucky.”

If you have the money and the space, adding a secondary suite can pay dividends – and it will also help address the housing shortage in Southern California. Any money you pour into building one will be reflected in the value of the property when you decide to sell (and when you pay your property taxes), and in the meantime, you can rent the space for a few thousand every month.

If you need inspiration, The Times has featured plenty of ADU builders. This guy built one on a budget of under $100,000, and this single mom built one while managing not to kill the 60-year-old Chinese elm tree that towers over the property.


Now that we’ve covered all the extra costs of homeownership, let’s talk about where you could save money – and that’s taxes.

The 2017 Tax Cuts and Jobs Act reduces the amount that home ownership can save you in tax payments, but there’s still a benefit.

Under current law, you can deduct mortgage interest payments to reduce your taxable income on a mortgage up to $750,000. This means that if you have a mortgage of up to $750,000, you can deduct all of your interest payments. If you have a mortgage greater than this amount, you can still deduct the interest payments – this would equal a $750,000 mortgage.

Things to consider

You must itemize your taxes to take advantage of these deductions. In some cases, you’ll save more money by taking the standard deduction instead.

For 2022, the standard deduction will be $12,950 for individuals or married persons filing separately and $25,900 for married couples filing jointly.

If you’re not sure what’s best for your situation, seek out a tax advisor who can point you in the right direction.

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