Costs to Buy a Home in Arizona Paid at Closing
Down Payment: Your down payment is not a cost. It reduces your loan amount and if your purchase price is less than or equal to the appraised value, it becomes equity in your home. But, it is a significant cash outflow and the #1 barrier to buying a home. The minimum required down payment depends on your loan type. It can typically range from 0% (VA and USDA) to 5% (conventional).
Origination Charges: Origination charges are fees that are charged by the lender (the originator). They vary from company to company and can be structured in many different ways. For example, some companies charge lower fees and higher rates. Others will advertise low rates, but charge high fees. It is difficult to know if you’re getting a good competitive deal. If you want to be able to compare your rate and fees quoted from company to company, the best way to do so is by comparing the annual percentage rate (APR). The APR allows you to compare apples to apples. No matter how a company structures their rates and fees, it all blends together in the APR. The APR is a way of expressing the costs as a rate. When comparing quotes for the same loan type between two companies, the lower APR is the better deal.
Here is a list of typical origination charges. This list is not all inclusive.
Origination Fee: The origination fee is a charge by the lender to help cover expenses related to the origination, processing and funding your loan. It is considered to be similar to discount points. It is not mandatory to pay an origination fee. Some lenders charge it and others don’t. You may be able to deduct an origination fee paid against your taxes. Check with your CPA or tax adviser. It typically ranges up to 1% of the loan amount.
Discount Points: Discount points lower your interest rate in exchange for an upfront fee. As such, they are essentially prepaid interest. They are not mandatory but can be advantageous if you plan on having the mortgage for a long time (general rule of thumb: 5+ years). Discount points can also be tax deductible. Again, check with your CPA or tax adviser. Discount points are calculated as a percentage of the loan amount.
Processing Fee: This is the fee charged by the lender for the clerical and support duties necessary to analyze and verify the information that you provide to support your loan application such as your employment, income and assets. This fee varies from lender to lender but is typically around $500.
Underwriting Fee: This fee is charged by lenders to cover the cost to analyze the risk of performance of the loan. In other words, someone reviews your information in detail to obtain a satisfactory level of comfort that you will be able to make your payments. This fee varies from lender to lender and can range between $400 to $900.
Admin Fee and Application Fee: These fees help cover the lender’s general costs. They aren’t charged by all lenders.
Third Party Fees for Services You Cannot Shop For
These are fees that are required to process your loan application. As the name indicates, they are charged by third-party vendors that the lender uses. Appraisal fees and credit report fees fall into this category for disclosure purposes.
Here is a list of typical costs in this category:
Flood Certification Fee: This is a fee that must be paid for an assessment to see if the home that you are buying falls into a flood zone. Yes, we do have flood zones in Arizona. This fee is usually around $20.
Government Funding Fees: If you are getting a VA loan, you will typically have to pay a VA funding fee. If you are getting a USDA loan, you will typically be charged a guarantee fee. These fees help limit exposure to tax payers. The amount of the fees depends on different factors and they are typically financed into the loan.
Tax Service Fee: This fee is sometimes charged if the lender uses another company to monitor the payments of your tax bills. It is usually around $75.
Third Party Fees for Services That You Can Shop For
These are costs of buying a home that are charged by a third-party that you can shop for. Termite inspections and surveys fall into this category for disclosure purposes.
The most common costs that are in this category are your various title fees.
Settlement “Closing” Fee: This is the fee charged by the title company to handle your closing appointment where you will sign all of the documents necessary to buy your home. It can vary from company to company, but is usually around $400.
Lenders Title Insurance Policy and Endorsements: This insurance covers you and lender against any losses incurred because of various errors or issues that are related to the evidence of ownership and possession of the property. In Arizona, the title company and escrow company are usually one and the same. Remember that the title company is selected and agreed upon as part of your purchase contract. The title policy fee varies based on different factors but typically runs between $600 and $1000.
Miscellaneous Title-Related Fees: Depending on the title company, you may be charged a handful of miscellaneous fees such as courier fees, e-Doc fees, printing fees or fax fees. These fees usually don’t add up to be more than $100 to $150.
Attorney Fees: Some states use attorneys to prepare and review the loan documents. It is not a common practice in Arizona. So, attorney fees are not common in Arizona.
Jeff Barchi has been a REALTOR® and one of the best real estate agent Arizona expert and managing homes for sale in the Greater Phoenix area since 1999. He is ranked in the top 1% of all real estate agents in Arizona in Greater Phoenix, two time winner of top 40 Realtor AZ under 40 award, and the top 2% of all agents nationwide. In 18 years Jeff, as a leading Arizona real estate agent, has participated in approximately 900 transactions, i.e. homes for sale in Arizona, averaging approximately 50 per year. To put this number in perspective, the average Realtor AZ closes 11 transactions per year. If you are looking for the best real estate agent Arizona expert, Jeff Barchi is your guy. His real estate firm has been praised as the best Phoenix real estate company, he has been a very successful Scottsdale real estate agent and Paradise Valley Realtor.