An Overview of the Home Closing Process in California

May 9, 2024
Last updated:
May 9, 2024
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Closing costs and procedures for home buyers can vary based on what part of the country you live in and other factors. But in California, the closing process is fairly consistent from one transaction to the next. This gives buyers a better sense of what to expect.

This guide explains how the home closing process in California works, the typical costs home buyers have to pay, and some things you can do to keep the process on track.

How the Closing Process Works in California

The closing process can sometimes seem mysterious for first-time home buyers in California. Additionally, some buyers have misconceptions or misunderstandings about how the process unfolds.

For example, you might be surprised to know that:

  • The closing process can take place over several days
  • The document review and signing can be done electronically
  • The buyer and seller often never even meet in person

During your closing, you’ll review and sign various documents, including the purchase agreement (if not already signed), loan documents, and disclosures.

These days, digital home closing is increasingly common. Most of these documents can be reviewed and signed digitally, through Docusign and similar e-signature platforms. Digital documents can expedite the home closing process in California by reducing or even eliminating the need for office visits.

There are also a lot of funds moving around on closing day. The home buyer’s down payment will be collected and applied to the purchase price. Closing costs get paid. And the real estate agents involved in the transaction receive their commissions.

Once all documents are signed and the funds are confirmed, the mortgage lender will approve the funding for the loan.

When all of that is said and done, the deed will be transferred from the seller to the buyer. This marks the official transfer of property ownership and the closing of the transaction.

What the Escrow Company Does

In the state of California, the closing process is typically handled by an escrow company that specializes in this kind of thing.

Escrow companies facilitate the process by acting as a neutral third-party that handles various funds as they are transferred from one party to another. Escrow companies usually handle the following duties and tasks during a closing transaction in California:

  • Receives and reviews documents and funds
  • Holds buyer’s deposit in escrow
  • Facilitates title search and insurance
  • Coordinates with lenders for loan documents
  • Calculates and prorates expenses
  • Prepares closing documents
  • Coordinates signing of documents
  • Disburses funds to parties
  • Records necessary documents
  • Officially closes escrow account

In California, it’s common for the buyer and seller to mutually agree on an escrow company. According to the California Department of Real Estate:

“The choice of escrow is normally agreed upon by the principals to a real estate transaction and reflected in writing in the purchase contract. A seller may elect to choose ‘ABC Company’ and the buyer may choose ‘DEF Company,’ but both parties must ultimately agree, like they must on all terms and conditions of a sale.”

Typical Closing Costs for California Home Buyers

During this process, the home buyer will pay all of their closing costs, typically in the form of a cashier’s check or wire transfer. “Closing costs” is a collective term that refers to all of the charges and fees incurred throughout the California real estate transaction.

A home buyer’s closing costs in California can include title insurance fees, recording fees, transfer taxes, mortgage origination fees, and more. The question is, how much are closing costs in California?

Generally speaking, closing costs typically range from 2% to 5% of the total purchase price, when you combine the lender and non-lender fees.

As of spring 2024, the median home price in the state of California was around $784,000. If we apply the 2% to 5% range mentioned above, we end up with closing costs somewhere between $15,680 and $39,200.

This ballpark figure shows how closing costs can be a significant expense for home buyers in California. But there shouldn’t be any major surprises. You’ll receive an estimate of your costs when you apply for a loan, followed by a finalized breakdown a few days before the scheduled closing.

How to Help Keep the Process on Track

As a home buyer, there’s a lot you can do during the escrow stage to help keep the California home closing process on track. And in case you’re not familiar with the term, the escrow period begins after the buyer and seller have signed a purchase agreement and ends with the closing.

Here’s how to be a proactive home buyer throughout this process:

  • Stay in Communication: Throughout the escrow process, keep in touch with your real estate agent, lender, and escrow officer. Respond to any requests for information or documentation in a timely fashion.
  • Review Documents: Carefully review all documents provided by your lender and California escrow company, including the purchase agreement, loan documents, and disclosures. Ask questions if anything is unclear.
  • Meet Deadlines: Adhere to all deadlines outlined in the purchase agreement and loan documents. This includes providing any requested documentation to your lender or escrow agent.
  • Complete Inspections: Schedule and attend any inspections recommended by your real estate agent. This might include a home inspection, termite inspection, and a final walk-through of the home a couple of days before closing.
  • Prepare Funds: Be prepared to pay closing costs and the down payment as specified in the closing documents. Ensure you have the necessary funds available in your account.
  • Avoid Major Changes: Try to avoid making any significant financial changes during the period of time between your pre-approval and final closing. Switching jobs, making large purchases, or applying for credit could affect your loan approval.

It also helps to adopt the right mindset when you approach the closing. Remember that everyone involved wants the same thing—to conclude the transaction. It takes a team effort to reach the finish line.

As is the case in other areas, the home closing process in California can be a very involved one. There are several steps and parties involved in the process. But with the right professionals working with you, the process should be completed with little issue.

Ready to Buy a Home in California?

If you’re ready to get into the California housing market, be sure to partner with a mortgage company first. At Sammamish Mortgage, we can help you get pre-approved for a mortgage so you can focus on properties that fit your budget. Reach out to Sammamish Mortgage today.

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