As we all know, buying a home is a big financial decision, and there are many factors to consider besides the price of the home. Another major expense to consider when buying a home is closing costs.
Closing costs are the fees and expenses associated with completing a real estate transaction and transferring ownership of the property from seller to buyer. To help you prepare for the final steps of the home buying process, this Redfin article will detail closing costs in Arizona, who pays them, and what you can expect to pay as a buyer and seller.
What are the closing costs in Arizona?
In addition to a down payment, homebuyers also need to pay closing costs to get the keys to their new home. Closing costs in Arizona typically range from 2%-5% of the home purchase price. However, keep in mind that closing cost amounts depend on a variety of factors, such as the buyer’s loan program or negotiations with the seller.
For example, if you’re buying a home in Tucson where the average sales price is $335,990, closing costs could range from $6,720 to $16,800. Or, let’s say you’re buying a home in Phoenix, where the median sales price is $463,000. Closing costs for a home here can range from $9,260 to $23,150.
Who Pays Arizona Closing Costs?
In most areas, including Arizona, both the buyer and seller will pay closing costs. But buyers and sellers will pay different closing costs and may have different total closing cost amounts. Keep in mind that it’s common for the buyer to pay closing costs out of pocket, while the seller’s closing costs are usually deducted from the home sale proceeds.
Arizona buyer closing costs
For Arizona home buyers, closing costs can be expected to be 2%-5% of the purchase price. In most cases, you will pay a deposit, usually 1% to 3% of the home price, once the two parties come to an agreement during the home buying process. This deposit will be deducted from your closing costs, reducing the total due at closing. Here are some common closing costs that buyers typically bear:
- Assessment fee: Your mortgage lender will require a home appraisal to make sure the home is worth equal to or greater than the loan amount. A home appraisal typically costs between $300 and $500, depending on location. If you pay at the time of service, it will not be included in your closing costs.
- Inspection fees: Although not required, a home inspection is highly recommended. The cost of a home inspection generally ranges from $300 to $500 and is usually paid at the time of service. However, if not, payment will be required at closing.
- Loan origination fee: Most lenders will charge you a loan fee. Be sure to check with your lender what this fee covers and whether it can be waived or negotiated.
- Loan processing fee: Lenders may also charge fees for loan processing, including underwriting and related services. Similar to the origination fee, check with your lender to understand its purpose and possible exemptions.
- Loan discount points: If you buy points to get a lower interest rate, you’ll usually pay a one-time fee at closing. Each point can lower your rates by 0.25% to 0.5%. Before purchasing points, consider your long-term plans, such as how long you plan to own the home or whether you plan to refinance.
- Private Mortgage Insurance (PMI): If the down payment is less than 20%, PMI may charge an upfront fee at closing, depending on the loan type. It is usually part of your monthly payment, but some loans offer the option of paying it as a one-time fee.
- Title Insurance: Title insurance is a one-time fee paid as part of the closing costs. Buyers often carry both lender and owner title insurance.
- Home Insurance: Your annual home insurance premium may be included in your closing costs in Arizona.
- Homeowners Association Dues: If your property is part of a homeowners association, you may be required to pay one month’s dues upfront at closing. These fees vary and add to maintenance and operating costs.
- property tax: As part of your Arizona closing costs, you may be required to prepay a portion of your property taxes at closing.
Arizona Seller Closing Costs
Closing costs for sellers in Arizona will vary per transaction, but here are some common fees and costs sellers incur:
- Real estate agent commission fees: These fees can be a significant cost for sellers. Commission fees may vary and are subject to negotiation. Sellers should discuss their options with an agent.
- Homeowners Association Fees: If the property is part of an HOA, the seller may be required to pay various fees. These fees may include HOA transfer fees, outstanding payments, and fees that may be incurred to obtain the HOA documents required by the buyer. The exact fees will depend on the HOA’s rules and regulations.
- property tax: Any outstanding property taxes will be due at this time. However, if the seller prepaid property taxes after the closing date, they may receive a refund for the portion that was paid but will not be used.
- Title Insurance: As part of the Arizona seller’s closing costs, the seller may pay for owner’s title insurance. Typically, this cost is based on the sales price of the home.
- Transfer tax: In Arizona, the seller is responsible for paying state taxes and possible local transfer taxes. These taxes are usually a percentage of the property’s sales price and vary widely by jurisdiction.
Median home sales price data from the Redfin Data Center for July 2024.
