Arizona can be a great place to buy a home and settle down. The state has beautiful weather and plenty of fun activities.
However, you might still have a few questions you need answered about the home-buying process, specifically about closing costs in Arizona and what you might be responsible for as a buyer. Here is a guide to help you better understand closing costs in Arizona.
What are Closing Costs?
Closing costs are amounts paid by the buyer and the seller when the real estate transaction is completed. Your total closing costs depend on a few different factors.
What are Buyers Responsible For?
There are certain fees and taxes that buyers are typically responsible for in the home-buying process, including:
- Loan origination fees: Lenders will charge a fee of anywhere between .5 and 1% of the total loan taken out by the borrower. This fee covers the loan account’s opening and the cost of lenders doing the creation, handling, and management of the loan.
- Attorney fees: For the home buying process, you will need a lawyer to handle the documentation and contract signing during the real estate transaction. The cost of this fee can vary from lawyer to lawyer.
- Homeowner’s insurance: The first year of homeowner’s insurance is something that many lenders require buyers to pay up-front as a part of the closing costs. This protects lenders from suffering the cost of any damages to your home in the first year you own it.
- Title-associated costs: When you buy a home, title companies will search to ensure that there are no claims against the property and that its records are in order. Additionally, you might opt to purchase title insurance before closing. While it is optional, it is a wise choice to protect you from fraud.
- Appraisal fee: An appraisal of your home is necessary to determine the fair market value of your property.
- Flood certification: This is another optional fee, but it is wise to have someone determine the flood zone status of your property to save you money on flood insurance.
- Recording fees: These fees are paid to the office in your county that handles the recording of public land records. You will need to pay your state or local government to cover the tracking of the property transfer from buyer to seller.
- Transfer tax: This is another cost that, as the name suggests, is paid when the ownership of a property is transferred from the buyer to the seller. The buyer pays this tax, which is a small percentage of the home’s total price. If the buyer and seller agree, sellers may also cover part of this tax.
- Underwriting fee: When lenders decide whether you will receive a loan, they will do extensive research on your background. An underwriting fee covers lenders’ work and ensures your security in this process.
- Escrow fee: This is a fee paid to an independent party that manages the closing of the property transaction, like an escrow company, title company, or attorney. This fee is dependent on the purchase price of your home.
- Property taxes: Property taxes are a tax paid to the state by the property owner. During the transfer of a property, a buyer and seller will negotiate to determine how the property taxes for the year should be split fairly between the two parties. Typically, these taxes will be divided by the buyer and seller right down to the closing date.
- Inspection fee: Depending on the type of loan you use to purchase your home, you may or may not be required to pay to have an inspector come and check the condition of a property before you buy it. This inspection not only protects you by guaranteeing a sound investment, but it can also help give you power when negotiating the property’s price with the seller.
What are Sellers Responsible For?
While buyers have to pay quite a bit in closing costs, it might shock you that sellers pay a much higher percentage of the home’s sale price. This could include:
- Realtor fees: Realtors make a commission on every home that they help to sell. The buyer pays this since the realtors are helping them secure their home’s sale. The amount they pay is typically a percentage of the home’s sale price and can vary from realtor to realtor.
- Transfer taxes: As stated earlier, this is often paid by the buyer, but it is not uncommon for sellers to pay a portion of this as well.
- Escrow fees: Since the independent party handling the transfer of the home does not work for either the buyer or seller, it only makes sense that both parties pay for their fees.
- HOA transfer fee: If the home is in a homeowner’s association, then the seller is responsible for any payments owed as well as any costs associated with the transfer within the HOA.
