Calculating the minimum amount needed for a down payment is pretty easy--it's typically just a percentage of the sales price based on loan program. For example--minimum 3% for conventional, 3.5% for FHA, zero for USDA and VA.
A buyer's share of closing costs is a bit more difficult----these costs can range from 2% of the sales price to as much as 5% or more.
In certain scenarios the seller or the lender might be able to pay a portion or even all of these fees on your behalf. However, keep in mind the seller paying a buyer's fees with a closing cost credit could affect your sales contract offer & negotiating position when faced with a competitive seller's market (a seller's market is when sellers have most of the negotiating power with more buyers than listings.) When a lender pays some or all of your closing costs your interest rate and monthly payment would typically be higher.
More on closing costs
Closing costs are a collection of fees required to set up and close a new home purchase along with a mortgage. They can range from 2% to 5% of the sales price for a home purchase transaction and 2% to 4% for a refinance loan. The sales price of a home will affect this percentage of closing cost range with a larger sales price being on the low end of that 2% to 5% range. On a Refi loan, closing costs will be less since many of the costs associated with a sale aren't found with a refi.
Closing fees include everything charged by your lender, home appraiser, escrow company, title company, home insurance company and other third parties involved in the mortgage and sale part of the transaction.
The settlement agent--in California an Escrow company --will collect these closing cost fees and distribute to the respective parties at closing. some fees like appraisal, inspection fees and occasionally home insurance premiums are prepaid prior to closing by the buyer and they would be reflected as a paid outside closing (POC) item and credited on the closing statement.
Closing costs can vary between regions as well as service providers. The major title and escrow companies (typically combined in Northern California) will be pretty close to each other in terms of what they charge. In Southern California, escrow providers are an independent company who contracts with a title company for the title portion of services. I have found over the decades that a separate escrow company providing closing services--one not connected to a title company --will typically have substantially higher fees--often higher by thousands of dollars. Thus a transaction in Southern California will most likely have higher title/escrow closing costs.
Below are the typical closing costs you should expect with a purchase transaction.
Lender fees
These fees can range widely based on the lender chosen and if paying points to achieve a lower rate. Here are some typical lender fees:
Loan origination fee
Loan garbage fees like processing, underwriting, administrative fees, etc. Quick tip--the bigger lenders --especially online lenders and many banks --charge these fees--and have a tendency to "hide" them during verbal conversations quoting rates and points--for example they quote a rate and "zero" points (each point is 1% of the loan amount) but fail to mention these garbage fees, leading one to believe they are cheaper than a lender who quotes "all lender" fees. Once you apply and a loan estimate is provided, these garbage fees will be listed under the origination section of the loan estimate page 2 box A. These garbage fees can be in the thousands of dollars.
Appraisal fee--this will vary based on the transaction, property type, property location and loan type. In rural areas of Northern California --for a conventional loan -- you can expect something around $675 since fewer appraisers service these areas and often an appraiser will travel greater distances to visit the property. In urban areas appraisal fees will often be less. Quick tip -- On conventional loans that meet certain criteria an appraisal may not be needed, thus saving this fee.
Lenders will also pass on some other fees to a buyer, like credit report fees, tax service, flood cert, a MERS fee, among others. These fees usually amount to less than $200 combined and a lender is not allowed to "mark up" these fees to more than what they actually cost the lender.
Government loans have additional fees that are typically financed into the loan. Keep in mind government loan rates are typically much better than conventional so having to pay or finance these fees may not be a deal breaker. An experienced loan officer can compare various loan program benefits for you based on your unique scenario.
Example of these financed fees:
FHA upfront mortgage insurance premium -1.75% of the loan amount and monthly mortgage insurance depending on the loan to value and term
USDA has a 1% Guarantee fee added to the loan as well as a monthly fee --currently .35% of the loan balance
VA funding fee will range from 1.25% to as much as 3.3% of the loan amount -depending on previous usage and if there is a down payment --added to the loan-- unless the veteran is exempt from paying the funding fee
Title and Escrow company fees
These fees will be dependent on the sales price, loan size, sales contract terms (who pays for what) and the property location, as well as what is customary for the buyer and the seller to pay in that region. Typically a buyer's fees for these services will range between $3k and $5k or more. An experienced lender should be able to more accurately estimate this range once they see a signed sales contact as well as know the title/escrow company chosen by the buyer and seller.
Home insurance
You, the buyer shop for and choose your insurance company. The first year's annual premium is either paid by the buyer or collected and paid by the escrow/title company at closing. Home insurance premiums will be dependent on home location, home size and property amenities and even the insurance loss history of the buyer. In the Northern California foothills premiums can range between $2k a year to as much as $7k or more. Often a buyer in the foothills or mountains will have to utilize the California Fair Plan, the high risk insurance program "of last choice" provided by the state. More info can be obtained from your insurance agent of choice or at this link https://www.cfpnet.com/
Impound account setup
Some loan programs like FHA and USDA or conventional loans with less than 5% down will have mandatory impound escrow accounts where the lender collects reserves and then includes 1/12 of the annual property taxes and home insurance in each monthly payment. The amount of reserves will vary based on the time of the year a transaction closes, the sales price and the amount of the annual home insurance premium. A good estimate would be 6 months of taxes and 3 months of the annual home insurance premium. On a $500k sales price with a $3500 annual home insurance premium, a good guess would be about $4k needed to set up this reserve account. On Conventional loans with at least 5% down or a VA loan --impound accounts are typically optional-- depending on a lender's policy of course (lender's can set their own rules in many cases). If there is no impound account then all property tax bills and the home insurance renewal premium will be paid by the buyer directly--and of course the monthly payment would be much lower since these are not collected by the lender.
Prorated property taxes
Depending on when a transaction closes the seller may have either prepaid the property taxes or they would be paid on the seller's behalf at closing. If this occurs, you the buyer would have a charge--called a proration-- of these prepaid taxes based on how many days the seller has prepaid them. Typically, the larger the amount of prorated taxes you are charged, proportionally less property taxes are collected in the impound account reserve.
Other transaction fees
Fees for buyer paid inspections like home inspection, septic or well, or pest inspections may be charged depending on the transaction and the buyer's wishes. If the property is within a HOA there will typically be HOA transfer fees and possibly a proration of previously seller paid HOA fees.
There may be additional fees charged to the buyer not included above, however these are the most typical.