Closing day marks one of the biggest milestones in your real estate journey. It is the final step before you take ownership of your new home, and it comes with a set of financial obligations known as closing costs. These fees cover a wide range of professional services tied to the purchase and sale of property.

Below is a complete and easy-to-follow overview of what closing and title costs include, how they work, and why they matter for every California real estate transaction.

What Closing Costs Cover

Closing costs are made up of fees paid to various parties who help complete the sale. Common expenses include:

• Real estate commissions

• Appraisal fees

• Loan origination and lender charges

• Escrow fees

• Advance payments such as property taxes and homeowner’s insurance

• Title insurance premiums

• Pest inspections

• Recording and transfer fees

Both the buyer and seller may pay different portions of these fees depending on the agreement outlined in the contract.

How Much You Can Expect to Pay

Closing costs vary with each transaction. When financing a home, lenders are required to provide a Loan Estimate after your loan application is submitted. This document summarizes key loan terms and projected fees.

Before closing, you will receive a Closing Disclosure, which breaks down all final costs and allows you to compare them with your Loan Estimate. This ensures transparency and helps you prepare the exact amount needed.

When Closing Costs Must Be Paid

Closing costs must be paid in full during the closing appointment. Since multiple parties need compensation at that time, payments cannot be made in installments.

Your funds should be provided as a cashier’s check issued by a California financial institution or via wire transfer, depending on what your escrow company requires. Personal checks and out-of-state checks may delay or jeopardize your closing.

Is Title Insurance Required?

While California does not legally require title insurance, lenders almost always mandate it when securing a mortgage. Buyers also choose it for peace of mind because it protects their ownership rights.

How Much Title Insurance Costs

A common misconception is that title insurance makes up a large portion of closing fees. In reality:

• The premium is often less than one percent of the purchase price.

• It usually represents under ten percent of total closing costs.

• It is a one-time premium that covers you and your heirs for as long as you own the property.

Who Pays for Title Insurance?

Payment responsibilities vary across California. In some counties the buyer pays, in others the seller pays, and sometimes they split responsibilities between owner and lender policies. Ultimately, it depends on what both parties negotiate in the purchase agreement.

Why Owner and Lender Policies Are Separate

Both you and your lender need protection, but for different reasons:

• Owner’s Policy: Ensures you have clear ownership and protects you against future claims.

• Lender’s Policy: Ensures the lender’s lien is enforceable and marketable.

Mortgage investors often purchase loans from local lenders. Without proper title insurance, a loan may not qualify for resale, making it unmarketable.

What Your Title Premium Really Pays For

Title insurance is built on risk elimination, not actuarial risk like other insurance products. The cost covers the labor and expertise required to research and verify your property’s history.

Title companies invest heavily in:

• Maintaining detailed title plants, often going back over a century

• Analyzing public records daily

• Identifying liens, claims, or encumbrances

• Ensuring your ownership rights remain protected

Even with thorough research, claims may still arise due to human error or legal changes. When they do, title insurance ensures you have a professional team defending your rights.

Who Can Guide You Through Closing Costs?

Your title and escrow team is your best resource for reviewing your closing statement and policy. They can explain each part of the process and direct you to legal or tax professionals if needed. While they cannot provide legal advice, they ensure you understand your documents before signing.

If you’re preparing to buy or sell a home in California, understanding closing and title costs helps you move through the final steps with confidence. When you know what to expect, closing day becomes a smooth and rewarding finish to your real estate journey.

Download our Closing Cost Guide to learn more.

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