Closing costs are the fees and expenses you pay to finalize your mortgage, on top of your down payment. In California, buyers typically pay between 2% and 3% of the loan amount in closing costs. On a $700,000 home loan, that's $14,000–$21,000. Most buyers don't see this number until later in the process, which is why it catches so many people off guard.
Here's what's actually in that number and how to reduce it.
What's included in closing costs?
Closing costs aren't one fee — they're a collection of them. The main ones include:
Lender fees — origination fee, underwriting fee, processing fee. These go to the lender for putting together and approving your loan.
Third-party fees — title search, title insurance, escrow fees, notary fees. These go to other companies involved in the transaction. In California, title and escrow fees are typically split between buyer and seller, though it's negotiable.
Prepaid items — this is the one that surprises people most. You pay your first year of homeowner's insurance upfront, plus a few months of property taxes into escrow, and interest from the closing date through the end of that first month. This isn't really a "cost" in the traditional sense — it's money that goes toward your ongoing expenses — but it's cash you need to bring to closing.
Government fees — recording fees to the county, and any transfer taxes.
How much are closing costs in California specifically?
California is on the higher end for closing costs nationally, mainly because of escrow and title fees. For a $700,000 purchase, a realistic estimate for a buyer looks something like this:
- Lender fees: $1,000–$3,000
- Title and escrow: $3,500–$5,000
- Homeowner's insurance (first year): $1,200–$2,000
- Property tax reserves: $2,000–$4,000
- Prepaid interest: $500–$1,500
- Recording fees: $150–$300
Total: roughly $14,000–$21,000 depending on your loan and property.
Can closing costs be reduced?
Yes — a few ways.
Negotiate with the seller. In a market where sellers have a little more flexibility, you can ask for seller credits toward closing costs. The seller essentially pays some of your closing costs out of their proceeds. It reduces their net, but it can make a big deal for you out of pocket.
Shop your title and escrow. Not all title companies charge the same. In California, you generally have the right to choose your own escrow and title companies, which means there's room to compare.
Use lender credits. Some buyers choose a slightly higher interest rate in exchange for a credit from the lender that offsets closing costs. Whether that trade makes sense depends on how long you plan to keep the loan.
Roll costs into the loan. Depending on the loan type and how much you're borrowing, some fees can be financed into the loan amount rather than paid upfront. This increases your loan balance but reduces what you need in cash at closing.
When do you find out the exact number?
By law, I have to give you a Loan Estimate within three business days of your application — and it itemizes every closing cost you'll be expected to pay. Three days before closing, you'll get a Closing Disclosure with the final, locked-in numbers. No surprise invoices at the closing table.
I'll also walk you through a detailed cost estimate early in the process, so you're not doing mental math while trying to decide whether to make an offer.
Bottom line
Budget 2–3% of your loan amount for closing costs, on top of your down payment. Then let's look at what programs, credits, or seller negotiations might reduce that number for your specific deal. It also helps to have your pre-approval locked in first, so we know the exact loan amount we're working with.