The Guide To Closing Costs in Bakersfield

When buying or selling a home, closing day is a cause for celebration. 

Closing costs on the other hand – not so much. But they’re a necessary pain in the wallet area.

For sellers, closing costs are fairly straightforward. Aside from Realtor® commissions, you may pay some title insurance, escrow fees, transfer tax, and other costs that typically amount to a few thousand bucks. This only applies if you don’t agree to cover some of the buyer’s closing costs. 

For buyers who are obtaining a mortgage, the list is much longer. Total closing costs will usually range from 2% to 3% depending on your loan and prepaid expenses (insurance and taxes). 

What’s Included in Bakersfield Closing Costs?

Here is a list of the most common closing costs, which are detailed throughout the post:

• Mortgage-Related Fees
  • Origination Fee
  • Underwriting Fee
  • Discount Points
  • Processing Fee
  • Application Fee
  • Credit Check
  • MERS Fee
  • Flood Certification
  • Prepaid Interest
  • Private Mortgage Insurance (PMI)
  • Single Payment PMI
  • PMI Table
• Title Search and Title Insurance
• Transfer Tax
• Attorney Fees
• Homeowner’s Insurance
• Property Taxes
• Mello-Roos Taxes
• HOA fees
• Appraisal Fee
• Home Inspection Fees
• Home Warranty
• Signing Service
• Miscellaneous Fees

How Much Are Closing Costs in Bakersfield?

Let’s check out the price tag on the most common real estate closing costs.

Mortgage-Related Fees

Unless you’re paying cash for a home, you can expect to pay total mortgage-related fees between 0.5% and 1.5% of the loan amount. The median home price in Bakersfield is currently about $380,000.

Assuming a 5% down payment, total loan fees usually fall between $1,800 and $3,600 — which does not include up-front mortgage insurance or an interest rate buydown (explained below). These averages will escalate with loan size.

A mortgage lender charges some combination of these common loan fees: 

Origination Fee

The origination fee covers the cost of underwriting the loan, which is verifying all income and asset documentation, and any other requirements of a particular loan program.

Underwriting Fee

The underwriting fee and the origination fee are used interchangeably to describe the process of evaluating a loan. This can be charged in addition to or in place of an origination fee.

Processing Fee

This is another generic loan processing term that covers collecting and completing documentation and paperwork. We usually see these fees around $250.

Application Fee

Lenders charge this non-refundable fee to initiate the loan process, which is either used as credit toward a successful closing or kept if the loan doesn’t close. This fee should be less than $100.

Credit Check

A credit check should be the first step in the loan process. Most lenders won’t charge an upfront fee but will pass through the expense at closing. The typical cost is about $30 per applicant. 

MERS Fee

The MERS fee covers the cost of registering a loan in the Mortgage Electronic Registration System, a mortgage industry database that tracks loans. The fee is typically about $25.

Flood Certification

A flood certification fee is charged to verify that a property is not in a flood zone, which is done by reviewing government flood zone maps. This fee is usually less than $20.

Prepaid Interest

Mortgage interest will be pre-paid from the date of closing to the end of the month. This expense can vary widely depending on your monthly payment and the closing date.

A July 2nd closing date would mean you’re prepaying almost your full monthly payment at closing. Conversely, July 27th closing date would mean a minimal prepayment. The good news is that mortgage payments are paid in arrears so your next payment won’t be due until the 1st of the following month.

Discount Points

Discount points are upfront fees paid for a lower interest rate. Paying one discount point (1% of the loan amount) typically reduces the interest rate by about 0.25%. Learn more about interest rate buydowns.

This cost and PMI below are not included in the total estimated loan fees of 0.5% to 1.0%.

Private Mortgage Insurance (PMI)

For borrowers who make less than a 20% down payment, lenders typically require the borrower to purchase private mortgage insurance (PMI). PMI is provided by a private insurance company to cover the lender against loss from mortgage default and ensuing foreclosure. PMI protects the lender, not you as a borrower under default.  

For Conventional loans, monthly PMI premiums range from 0.5% to 2% of your loan balance per year, depending on your credit score, down payment, loan term, mortgage type, and mortgage size.

For FHA loans, monthly PMI premiums are currently 0.55% regardless of the criteria mentioned above. FHA changes this from time to time.

A borrower is required to pay PMI as long as the loan-to-value ratio (LTV) is greater than the lender’s maximum LTV threshold, usually 80%.

PMI can be paid as an ongoing monthly fee when your mortgage payment or as a one-time, upfront fee.

Single Payment PMI

A single-payment, upfront premium can be large but it can make more sense than several years of monthly premiums. For example, paying a 1.75% upfront premium on a $400,000 loan will cost $7,000. Instead, a monthly premium of $250 equates to $3,000 per year, which means paying 9,000 over 3 years.

For Conventional loans, single-payment PMI rates vary widely depending on your credit score, LTV ratio, loan term, mortgage type, and mortgage size.

For FHA loans, a single-payment PMI rate is currently 1.75% regardless of the criteria mentioned above. FHA changes this from time to time.

To complicate things even further, there’s also a range of PMI coverage levels, or what percentage of the loan is covered by insurance.  We won’t dive into that here, but the table below is based on the maximum required coverage levels.  

PMI Table

Below is an example of the PMI rate structure, which can vary depending on the market, the mortgage, and the lender. It’s continually subject to change, so consult with your lender about current rates.

Monthly PMI Fees (30 Year Fixed Rate Mortgage)

Escrow Fees or Closing Fees

In Bakersfield and California as a whole, escrow fees are typically split 50/50 between buyer and seller. However, a buyer can ask the seller to pay for these in the purchase contract which the seller can accept or decline.

Escrow fees, also known as settlement fees or closing fees, are not fixed by California state law. The fees are driven by competition among title companies. In Bakersfield, a sale price of around $400,000 would see fees ranging from $1,200 to $1,500, which are usually split between the buyer and seller.

Escrow is the process of submitting documents, the earnest deposit, and other purchase funds with a neutral third party. Escrow will hold all funds and documents until conditions among the parties have been met, after which funds are disbursed and the grand deed is recorded.

Note that the escrow function is either performed by a title company or an escrow company depending on the county where the transaction occurs. An escrow-only company must use a third-party title company to issue title insurance.

The following are the primary tasks of an escrow company: 

• Follow the terms of the purchase agreement to ensure all parties perform.
• Receive and hold funds from the buyer and the lender.
• Handle all documentation including the recording of the grant deed.
• Research the property’s title history to verify all liens.
• Pay off all liens and vendors and issue title insurance upon closing.
• Provide a full accounting via the final closing statement.

Title Search and Title Insurance

Title insurance rocks! As a homebuyer, you want to own your home free and clear. In addition, you want protection if the title company missed a lien or encumbrance of some kind. Hence, you pay the title company for the exam, the insurance, and peace of mind.

Typically there are title insurance policies covering two parties, the owner and the lender. An owner’s policy usually costs $1,000 – $2,000. A lender’s policy usually costs between $500 – $1,000. These are for average transactions, say under $1 million in Bakersfield, and can run much higher for upper-end homes.

Typically, the seller pays for the owner’s policy and the buyer pays for the lender’s policy. However, these fees can be paid by either party.

Consult with your title company about exactly what’s covered and not covered by your title insurance, but it typically protects you against losses from title defects like the following: 

• Erroneous or illegal public records
• Unknown easements or liens 
• Unknown encumbrances
• Fraud or forgery
• Boundary disputes
• Outstanding lawsuits

Transfer Tax

As Benjamin Franklin said, “Nothing is certain except death and taxes.” In California, counties and certain cities levy real estate transfer taxes proportional to a home’s sale price. Thankfully, tax revenue is spent responsibly. Just kidding.

In Bakersfield (Kern County), real estate transfer taxes are levied at a rate of $1.10 per $1,000, which is set by the California Revenue and Taxation Code. The county transfer tax would be $550 on a $500,000 home purchase.

Transfer tax is usually paid by the seller but can be negotiated in the purchase agreement. In a seller’s market, the buyer might have to foot the bill.

Some cities in California levy additional transfer taxes, like a whopping $4.50 per $1,000 in Culver City.

Fortunately, the City of Bakersfield does not levy additional transfer taxes. 

Attorney’s Fees

As if attorneys don’t earn enough already, some states require that attorneys also handle real estate transactions. Fortunately, California is not one of them. 

All the standard forms used in residential real estate transactions are issued by the California Association of Realtors. The C.A.R. forms are developed and modified by attorneys, so the legal backdrop is already in place for each transaction. It’s up to Realtors® and title companies to ensure that everything is done properly.

That said, using an attorney may be appropriate if a transaction is unusual or involves a legal dispute.

Homeowner’s Insurance

Stuff happens. Hazard insurance is required by all lenders to cover perils such as fire, natural disasters, theft, and vandalism. You would want it anyway.

Homeowners insurance is a prepaid expense. The mortgage lender collects 6 to 12 months of insurance premiums at closing and pays the insurer. To protect its investment, a lender will keep track of your insurance coverage and “force-place” insurance if necessary. 

Consult your insurance agent for a precise cost. Earthquake insurance is not typically required but can be purchased at an additional cost.

Property Taxes

Yay, more taxes! Property taxes are prorated between the buyer and seller at closing – then prepaid by the buyer. The amount depends on the transfer date and current tax assessment.

In California, property tax bills are commonly comprised of the following levies:

• A 1% general levy, established by Proposition 13 in 1978.
• Voter-approved debt, levied in small percentages of assessed value.
• Direct assessments, which are flat fees specific to every property.

The general levy is 1% of your home’s assessed value, which is equal to your purchase price (unless the property was purchased under market value). Increases in your assessment are limited to a 2% increase per year unless major improvements are made (like a room addition) — then the cost of the improvement is added to the assessment.

Each tax line item specifically identifies where the tax is distributed.  The 1% general levy is distributed among various agencies within your county.

The taxes on any Bakersfield property can be verified at the Kern County Tax Collector’s website.

Below is an example of the list of taxes.

Mello-Roos Taxes

Hoorah, even more taxes!  A Mello-Roos District, also known as a Community Facilities District (CFD), is a special tax district that sells bonds to finance certain public facilities and services. The tax revenue is used to make principal and interest payments on the bonds.

These tax districts are typically in newly developed areas, which need additional funds to cover the cost of infrastructure including streets, sewers, utilities, schools, police, parks, etc. 

These taxes can be hefty, so it’s good to know them ahead of time. Ask your Realtor® or research tax bills in the neighborhood.

HOA Fees

HOA fees cover the cost of maintaining common areas in a subdivision, including pools, gates, community parks, fitness centers, clubhouses, and more. Neighborhoods with higher HOA fees usually enjoy more amenities. 

HOA fees in Bakersfield range from $30/month to $500/month, which are prorated through escrow. There are also HOA transfer fees that are typically paid by the seller.

Appraisal Fee

Any mortgage lender will require an appraisal to confirm that a home’s purchase price is supported by recent comparable sales. In Bakersfield, the cost of an appraisal can range from $350 to $1,000 depending on the size of the home and how quickly the appraisal is needed.

The appraisal fee can be paid upfront or at closing, depending on the situation.

Home Inspection Fees

In Bakersfield, two types of inspections are typically performed: a general home inspection and a termite inspection (or wood-destroying pests). A general home inspection generally costs the homebuyer between $350 to $500 depending on the size of the home, while termite inspections cost around $75.

Lenders do not usually require inspections other than the appraiser’s notations. 

Inspections are highly recommended for the benefit of the buyer. In fact, a liability waiver must be signed if a buyer does not want to conduct home inspections.

Home Warranty

Homeowner’s insurance covers major hazards, but it doesn’t cover much of the small stuff, which can also carry a depressing price tag. 

A home warranty policy provides an extra level of protection for appliances, heating and air conditioning systems, electrical systems, plumbing systems, and more. If something breaks down, the repair cost is covered by the home warranty company. 

Nobody wants to pay to repair or replace an A/C system during a Bakersfield heatwave!

Signing Service

When a homebuyer or seller cannot sign documents in person at the title company, a signing service can be arranged. This deserves a category because it can cost several hundred dollars depending on the situation.

Miscellaneous Fees

It seems like every real estate transaction has a few small fees like recording fees, messenger fees, endorsement fees, etc. As explained below, you should receive a Loan Estimate with every fee, so you can ask about the nickel-and-dime stuff.

How To Minimize Closing Costs

Now that an avalanche of costs has fallen on you, here are some tips to minimize them.

Closing Cost Assistance

The California Housing Finance Agency (CalHFA) offers various down payment and closing cost assistance programs including CalPlus, USDA, and the CalHFA Dream for All shared appreciation loan.

The Golden State Finance Authority offers a down payment assistance program to lower-income homebuyers. 

Your lender can be a good resource for these programs and others that may be offered at a city, county, state, and national level. After all, they want your business.

Seller Concessions

A seller concession means that the seller agrees to pay for some or all of a buyer’s closing costs. Getting a seller to agree is the trick, which depends on the seller’s eagerness to sell and the state of the market.

In a seller’s market, it’s very unlikely that a seller will pay for any of the buyer’s closing costs. In fact, the buyer may have to offer to pay for costs that are ordinarily split.

In a normal market, a seller might pay for closing costs if there are no superior offers. For example, there might be one offer for $10,000 below the asking price. To exceed that offer, a buyer would have to give the full asking price to get $5,000 in closing costs and leave the seller better off by $5,000.

In a buyer’s market, a seller might be willing to accept an offer below the asking price and also pay some buyer closing costs. 

Of course, every situation is different depending on the property and the seller.

Dare to Compare

After applying for a mortgage, you should review the lender’s mandatory “Loan Estimate” form. To compare fees, you will have to apply with multiple lenders but the savings could be worth the hassle.

A much easier route is to ask for Loan Estimate forms before completing an application, which many lenders will do if given some basic qualifying information.

Keep in mind that closing costs are only half the equation. One lender might have slightly higher fees but offer a much better interest rate, which is better in the long run. Great service also counts so a good referral goes a long way.

You can also compare services like inspection fees. This can be done after you’ve decided on a lender since inspections are not done until a home is in escrow. 

Negotiate Fees

Use the Loan Estimate to review each line item with the lender. Simply questioning what each fee covers will often prompt an offer to reduce or eliminate a fee. Repeat the same process with the escrow or title company.

Beware of fees with vague or similar names, since there are often overlapping terms and tasks in loan processing and title services. 

A few days before closing, your lender will provide a Closing Disclosure (CD) form that details the final closing costs. Be sure to compare the CD with the Loan Estimate and reconcile any discrepancies with the lender and title company.

Delay The Closing

Prepaid interest can be minimized by closing at the end of the month. However, this doesn’t have much overall impact and can be difficult to achieve when the closing date is set upfront.

Closing Time

So there you have it – the good, the bad, and the ugly closing costs. Well, maybe there aren’t any “good” closing costs but some aren’t as bad as others.

Be sure to consult with a top Bakersfield Realtor® and lender, who may know additional ways to minimize your closing costs and down payment.