Learn what first-time buyers should budget for closing costs. Review lender charges, prepaid expenses, and ways to plan your cash needed to close.
Yosef Shapiro, Mortgage Broker
Electronic Mortgages Inc
Phone: (707) 280-9627
Email: [email protected]
NMLS# 896711
Company NMLS# 275208
Licensed in: CA
This is not a commitment to lend, not a guarantee of approval, and not an offer to extend credit. Any rates, payments, costs, or timelines are estimates for educational purposes only and can change. Your actual rate, payment, and fees depend on credit, income, assets, property, down payment, and the loan you qualify for. Estimates may not include taxes, insurance, prepaid items, or other fees. I am not a tax, legal, or financial advisor. Equal Housing Opportunity. NMLS ID 896711. Licensed in California
Learn what first-time buyers should budget for closing costs. Review lender charges, prepaid expenses, and ways to plan your cash needed to close.
Buying your first home is a huge milestone, but the out-of-pocket costs at the finish line can catch many buyers off guard. Closing costs are the collection of lender fees, third-party charges, and prepaid items you’ll pay at escrow to finalize your home purchase. In this article, I’ll walk you through what makes up closing costs, typical amounts, options to manage these expenses, and what to watch for as a first time buyer in South Orange County and surrounding areas.
Purpose: Closing costs are the required fees and prepaid expenses due at the completion of your home purchase.
What’s Included: Lender fees, third-party services (appraisal, title, escrow), property taxes, homeowner’s insurance, and prepaid interest are the main categories.
Timeline: Usually due at escrow closing, right before you get your keys.
Best For: Buyers preparing for a home purchase, especially first time homebuyers who want to avoid surprises.
What are closing costs? These are the various fees and prepaid items (like taxes and insurance) due at the end of your home purchase, separate from your down payment.
How much should I budget? It varies, but closing costs often run thousands of dollars – generally a percentage of your loan amount. Ask for an estimate early on.
Can I negotiate these costs? Some, yes. Others (like government fees and independent services) are fixed. You can also request seller credits or lender credits to offset them.
When are closing costs due? They’re typically due at escrow closing, before you get the keys to your new home.
At Yosef Shapiro (NMLS# 896711), I work with a lot of first time buyers across South Orange County, so I know this part of the purchase often brings the most confusion. Closing costs cover all the one-time charges needed to finalize your mortgage and take ownership of the property. These are in addition to your down payment and paid through escrow, usually via a cashier’s check or bank wire at your signing appointment.
Here’s a quick list of the main line items you’ll see on your final closing disclosure:
Lender fees: Application, underwriting, processing, credit report
Third-party fees: Appraisal, title insurance, escrow/settlement
Prepaid items: Property taxes, homeowner’s insurance, daily interest up to your first payment
Other: Notary, recording, transfer taxes (if applicable in your area)
The exact amounts can vary a lot depending on your loan program, location, and the specific service providers.
There’s no single number for closing costs since every transaction is different. For example, buying a condo in Irvine may have some association transfer fees, while a home in Dana Point could have higher title insurance rates just based on the purchase price.
For first time buyers, expect to pay a total that equals a certain percentage of the purchase price, often ranging from 2% to 5% of the loan amount—but remember, it’s not always that simple. Loan type, size, and even if you’re financing with a FHA loan or conventional loan can affect the figures. (If you’re curious about low down payment options, I can definitely help with that—just ask for a rundown of available programs.)
Every lender has their own approach when it comes to origination, underwriting, and miscellaneous charges. In general:
Main “lender” costs: Underwriting, processing, application, and sometimes an origination charge
Discount points: Optional fees to buy down your interest rate
Credit report, tax service, flood certification, and other smaller items
Some lenders wrap part of their margin into your rate, while others separate the administrative fees. Always ask for a Loan Estimate early to see the breakdown before you get too far along. If you ever want me to review your estimate side by side, let’s talk.
These are paid out to the folks who help close your deal, not to your lender or broker.
Appraisal: An independent valuation to protect both you and your lender
Title insurance: Covers you and your lender if there’s a problem with past ownership or liens on your property
Escrow/settlement: The neutral party managing the money and documents for buyer and seller
Recording/Notary: Officially registering the property with the county
Some fees are based on your purchase price, others are fixed by service providers. In South OC, title and escrow fees can also vary based on which company or attorney is involved, so any estimate is just that—a starting point.
Prepaid items don’t pay for services—they’re just collected up front so your new lender can pay your property taxes and home insurance (and make sure the house is protected from day one). These include:
First year of homeowner’s insurance (required up front)
Property taxes (typically a few months’ worth set aside for the impound account)
Daily interest, from closing date until your first regular payment
Sometimes, prepaid mortgage insurance if your down payment is below a certain amount
Impound (escrow) accounts are common, especially for first time buyers, but they’re not mandatory. You can request to waive these in some scenarios, though it means handling taxes/insurance on your own instead of paying monthly with your mortgage.
This is something I’m asked nearly every week. With a regular purchase, you usually cannot roll closing costs directly into your mortgage over the home’s price. Most buyers pay them out of pocket.
There are workarounds:
Seller credit: Negotiate for the seller to pay some or all of your closing costs. This is more common when the market is slow, less so when homes are highly competitive.
Lender credit: Ask your lender to cover part of your closing costs in exchange for a slightly higher interest rate. This can be a good option when you’re short on cash but have strong monthly income.
Gift funds: Many loan programs allow gifts from family as long as they’re properly documented (especially for the down payment, but you can ask about using them for closing costs as well).
If you’d like to run numbers and see if these strategies might make sense on your deal, happy to assist—just let me know which properties you’re looking at or what your budget is, and I’ll put together a comparison.
Some expenses still catch folks by surprise, especially in California. A few to be aware of:
Transfer taxes: Certain cities or counties have extra taxes when a home changes hands
HOA transfer/setup fees: For condos, townhomes, and some planned communities in places like Aliso Viejo or Laguna Niguel
Supplemental property tax: Your first year may include an extra tax bill if the home’s value was reassessed
Home warranty: Sometimes negotiated between buyer/seller—can be several hundred dollars if included
I always recommend asking your agent and lender for a fully itemized estimate once you’re in contract so there are no last-minute surprises. If you want to discuss what’s standard for your zip code or see prior closing statements from other buyers in your area, let me know if you have any questions in the meantime.
First time buyers often save for the down payment and forget about the extra needed for closing. Here are a few ways to get ready:
Request early estimates from your lender and agent based on your target price range
Ask if any expenses are optional (like owner’s title insurance, discount points, impounds—it depends on your tolerance for risk and cash on hand)
See if you qualify for a first time buyer or homebuyer assistance program that may reduce fees or cover a portion of costs
Certain markets, like much of Orange County, have programs or grants that come and go. No harm in asking. I can walk you through the typical figures for your city and recommend steps to budget so you’re not caught off guard.
At closing (also called settlement), you’ll review your final statement with escrow or a notary. You’ll sign all of the loan and title paperwork, then wire or bring in your closing funds for both down payment and closing costs. Once the deal records at the county, you officially become the homeowner.
If you’re financing through a low down payment program or have unique income like self-employment, some additional steps or documentation may be required. Ask about this if any part of your situation isn’t completely standard.
The closing cost number is rarely identical from one deal to the next—service providers, property type, and even the day of closing can tweak the final tally.
I recommend reaching out for a personalized breakdown as soon as you start home shopping. As a mortgage broker, I have access to a wide menu of loan options and can shop different lenders for you. I’ll pull together a payment and closing summary as soon as you have a property in mind or even just a max budget. That way, you’re fully clear on what’s coming, and you can focus on finding the right home.
If you want to see side-by-side options, compare costs for fixed vs. adjustable loans, or review what’s required for particular programs, let’s talk. Happy to assist with anything from preapproval planning to reviewing real numbers before you make an offer.
Feel free to call, text or email me anytime to review your scenario, see what closing costs may look like for you, and get a game plan in place for your first home purchase.
No, closing costs and down payment are two separate amounts. Your down payment goes directly toward the purchase price of the home, while closing costs pay for lender, title, escrow, and other transaction-related services.
Ask your lender and real estate agent for a Loan Estimate or a detailed closing cost worksheet as soon as you’re serious about a property. I can also provide a side-by-side estimate based on your location and loan type.