Home buyer closing costs in Washington State range from about 2% to 5% of the purchase price, on average. But there are many variables that can affect the total amount you pay at closing. You should receive a detailed “Loan Estimate” document when you apply for a mortgage loan that will give you an idea of your anticipated closing costs.
Closing costs tend to cause a lot of confusion among home buyers, especially among first-time home buyers. That’s because there are many different costs involved with the average real estate transaction, and they can vary quite a bit.
In this tutorial, we’ll look at average closing costs in Washington State, and examine some of the fees and charges you might encounter along the way.
What Are Closing Costs?
Let’s start with a basic definition, just so we’re on the same page. “Closing costs” is a collective term that refers to the various fees and charges incurred during a real estate transaction. Most of these fees are paid at the closing, which is when the title of the property gets transferred from seller to buyer.
Some closing costs are paid by the buyer, while others are paid by the seller. And this is another point of confusion among first-time buyers, because it’s all negotiable. For instance, a buyer could ask a seller to contribute toward the buyer’s closing costs. Or the two parties could each pay their own. It varies.
First-time home buyers are often surprised by the number of people who are involved in a typical real estate transaction. They assume it’s just the buyer, the seller, the real estate agents, and (sometimes) the mortgage company. In reality, there are many other “players” involved, and some of them charge fees for their services. These fees contribute to the closing costs paid by the buyer and seller.
For instance, the title company that performs a title search on the property will charge a fee for its services. There are also fees relating to credit reports, title insurance, mortgage insurance document preparation, property taxes, and (in some cases) legal services.
The good news is that you’ll receive an estimate of your closing costs up front, when you first apply for a mortgage loan. This important document is called the Loan Estimate. You’ll also receive a Closing Disclosure form shortly before the scheduled closing day.
These documents are designed to keep borrowers informed about the costs of the loan, and to prevent surprises. They should be very close to identical, so if you see a large discrepancy, reach out to your lender immediately.
Let’s move on to talk about how much you might pay for closing costs in Washington State, based on averages.
Average Home Buyer Closing Costs in Washington State
As mentioned above, there are many different types of fees that can arise during the home buying process. And they can vary from one borrower to the next, based on several factors.
For instance, Borrower ‘A’ might choose to pay mortgage discount points at closing in exchange for a lower interest rate. Borrower ‘B’ might forego the discount points in order to minimize the upfront closing costs. Borrower ‘C’ might not only forego discount points but they may also opt for a slightly higher rate to get a lender credit further reducing their closing costs. This could result in a difference of several thousand dollars in the amount these buyers have to pay at closing.
With that being said, there are some industry-wide averages for Washington State closing costs. Generally speaking, home buyers in Washington State can expect to pay somewhere between 2% and 5% of the purchase price.
Sellers tend to pay quite a bit more, partly due to the real estate excise tax. The seller usually pays the real estate agents’ fees as well, which can add up to thousands of dollars. But again, much of this is negotiable between buyer and seller.
What Home Buyers Pay For
Home buyer closing costs in Washington State can vary from one transaction to the next. Depending on your situation, you might not have to pay all of the costs listed below. You could also encounter additional fees that are not on this list.
In a typical real estate transaction, home buyers in Washington State usually pay some, or all, of the following closing costs:
- Half of the escrow fees. This varies based on the final agreement made between buyer and seller, as stated in the purchase agreement.
- Title insurance fees.
- Recording charges for all documents in the home buyer’s name. Recording fees are usually paid to the city or county to cover the cost of creating new land records.
- Document preparation fees, when applicable.
- Homeowners insurance paid through the first year.
- Fees associated with the mortgage loan. These can include origination fees, discount points, credit reports, processor fees and others.
These days, home appraisals are generally paid for at the time the service is provided. So they don’t get added into the closing costs in most cases.
The important thing to remember is that you’ll receive a standardized Loan Estimate form when you apply for a home loan in Washington State. The second page of this document includes an itemized list of closing costs to be paid by the buyer.
You’ll receive a second document, known as the Closing Disclosure, shortly before you close. This disclosure will include the actual, finalized amounts that must be paid.
Have Questions About Home Loans in Washington?
Whether you have questions about mortgages or are ready to apply for one in Washington, Sammamish Mortgage is ready to help. We are a local, family-owned company based in Bellevue, Washington. We serve the entire state, as well as the broader Pacific Northwest region and offer a variety of mortgage programs to choose from, and have been helping borrowers since 1992. Please contact us if you have mortgage-related questions.