What Are Closing Costs and How Much Will They Be in San Jose?

When buying a home in San Jose, you'll need more than just your down payment. Closing costs—the fees and expenses you pay to finalize your home purchase—can add tens of thousands of dollars to what you need to bring to the closing table. Understanding these costs helps you budget accurately and avoid surprises.

How Much Should You Expect?

Closing costs in California typically range from 2% to 5% of the purchase price. In San Jose's expensive market, this translates to substantial amounts:

• On a $1 million home: $20,000 to $50,000
• On a $1.4 million home (median): $28,000 to $70,000
• On a $2 million home: $40,000 to $100,000

The exact amount depends on your loan type, down payment size, property taxes, and whether you negotiate seller concessions.

Breaking Down the Major Closing Costs

Lender Fees

Loan Origination Fee (0.5-1% of loan amount): Covers the lender's administrative costs for processing your loan. On a $1.2 million loan, expect $6,000-$12,000.

Underwriting Fee ($400-$900): Pays for the lender's review and verification of your financial information.

Credit Report Fee ($25-$50): Cost of pulling your credit from all three bureaus.

Flood Certification ($15-$25): Determines if the property is in a flood zone.

Tax Service Fee ($50-$100): Ensures your property taxes are paid on time.

Third-Party Fees

Appraisal Fee ($500-$800): Required by lenders to verify the property's value. Jumbo loans may require two appraisals, doubling this cost.

Home Inspection ($400-$800): While not required by lenders, inspections are essential. Larger or older homes cost more to inspect. Additional specialty inspections (pest, sewer, chimney) add $100-$500 each.

Title Insurance: This is significant in California:

• Lender's Title Insurance: Typically $1,000-$3,000, protects the lender
• Owner's Title Insurance: Optional but recommended, costs $1,500-$5,000+, protects you

Title Search and Examination ($200-$400): Reviews public records to confirm clear ownership.

Escrow Fee (1-2% of purchase price): In California, escrow fees are typically split between buyer and seller. On a $1.4 million home, expect your share to be $7,000-$14,000.

Recording Fees ($100-$250): County charges for recording the new deed and mortgage.

Survey Fee ($300-$500): May be required to verify property boundaries.

Attorney Fees: Not standard in California real estate transactions, but some buyers hire attorneys, costing $500-$2,000+.

Prepaid Items and Escrow Reserves

Property Taxes: In Santa Clara County, you'll prepay property taxes from closing date to the end of the tax period, plus set up an escrow account. Expect 3-6 months of property taxes (approximately 1.2% annually of purchase price).

On a $1.4 million home: $16,800 annual tax, meaning $4,200-$8,400 at closing.

Homeowners Insurance: Your first year's premium is due at closing, plus 2-3 months in escrow reserves. Expect $1,500-$3,000 annually ($1,875-$3,750 total at closing).

HOA Fees: If buying a condo or property with HOA, expect to pay first month's HOA fees plus possibly special assessments or transfer fees. Some HOAs charge buyers $500-$1,000 in move-in fees.

Prepaid Interest: If you close mid-month, you'll prepay interest from closing until month-end. On a $1.2 million loan at 7.29%, daily interest is about $240. Close on the 15th, and you'll pay $3,600-$4,000 in prepaid interest.

Optional Costs

Discount Points (1% of loan amount per point): Pay upfront to reduce your interest rate. One point on a $1.2 million loan costs $12,000 and typically reduces your rate by 0.25%.

Rate Lock Fee: Some lenders charge to lock your interest rate, typically $300-$500.

Courier Fees ($30-$75): For document delivery between parties.

Notary Fees ($75-$200): For signing loan documents.

Example: Total Closing Costs on a $1.4 Million San Jose Home

Let's break down realistic closing costs for a typical San Jose purchase:

Purchase Price: $1,400,000
Down Payment (20%): $280,000
Loan Amount: $1,120,000

Lender Fees:

• Origination fee (1%): $11,200
• Underwriting: $600
• Processing: $500
• Credit report: $35
• Flood cert: $20
• Tax service: $75 Subtotal: $12,430

Third-Party Fees:

• Appraisal: $650
• Home inspection: $650
• Pest inspection: $250
• Title insurance (lender's): $2,400
• Title insurance (owner's): $3,500
• Title search: $300
• Escrow fee (buyer's half): $10,500
• Recording fees: $150 Subtotal: $18,400

Prepaid Items:

• Property taxes (4 months): $5,600
• Homeowners insurance + reserves: $2,250
• Prepaid interest (15 days): $3,500 Subtotal: $11,350

TOTAL CLOSING COSTS: $42,180 (3% of purchase price)

Total Cash Needed at Closing: $322,180 (down payment + closing costs)

Ways to Reduce Closing Costs

Shop Multiple Lenders: Origination fees, underwriting fees, and points are negotiable. Compare at least three lenders.

Negotiate Seller Concessions: In buyer's markets, sellers may agree to pay a portion of closing costs (typically 2-3% of purchase price). This is harder in San Jose's competitive market but worth requesting.

Close at Month-End: Minimizes prepaid interest charges.

Review Your Loan Estimate Carefully: Compare fees between lenders line-by-line. Challenge any fees that seem excessive.

Skip Discount Points: Unless you're certain you'll keep the loan long enough to break even, points may not make sense.

Bundle Services: Some lenders offer discounts if you use their preferred title company or other vendors.

Roll Costs Into the Loan: If the seller will accept a higher purchase price, you can finance some closing costs (though you'll pay interest on them for 30 years).

Time Your Closing: Avoid closing just before property tax or insurance due dates that would require large prepayments.

FHA and VA Loan Closing Costs

FHA Loans: Closing costs are similar, but you'll also pay an upfront mortgage insurance premium (1.75% of loan amount) that can be rolled into the loan. On a $1.1 million loan, that's $19,250. Monthly mortgage insurance adds to your payment.

VA Loans: Veterans can avoid down payments but still pay most closing costs, typically 2-5% of purchase price. The VA limits some fees, and sellers often pay more closing costs on VA purchases.

When Are Closing Costs Due?

You'll receive a Loan Estimate within three days of applying for a mortgage, showing estimated closing costs. Three business days before closing, you'll receive a Closing Disclosure with final numbers—they cannot exceed the Loan Estimate by more than 10% for most fees.

Bring payment to closing via wire transfer or cashier's check. Personal checks aren't accepted for amounts this large. Your escrow officer will provide wiring instructions well in advance.

Tax Implications

Some closing costs are tax-deductible:

Deductible in Full: Property tax prepayments, discount points (if itemizing), prepaid mortgage interest.

Not Deductible: Most other fees like title insurance, appraisal fees, and loan origination fees. However, these may be added to your cost basis when you sell, potentially reducing capital gains tax.

Consult with a tax professional about your specific situation, especially given California's high property values and the state and local tax (SALT) deduction limits.

The Bottom Line

Closing costs are substantial in San Jose—plan to bring 2-5% of the purchase price beyond your down payment. On a $1.4 million home with 20% down, you might need $310,000-$350,000 total cash at closing.

Review your Loan Estimate carefully, shop multiple lenders, and negotiate when possible. Don't let closing costs surprise you or drain your emergency fund—budget conservatively and maintain adequate reserves even after closing.

The good news? Once you close, most of these one-time costs are behind you, and you can focus on enjoying your new San Jose home and building equity in one of America's strongest real estate markets.