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Saving for a down payment is a huge milestone—but it’s not the only expense you’ll need to plan for when buying your first home.
One of the biggest surprises for many first-time buyers is closing costs. These are the fees and prepaid expenses you’ll pay when your home purchase is finalized, and they’re separate from your down payment. In San Jose, they can add up quickly, so knowing what to expect ahead of time can save you from last-minute sticker shock.
Keep in mind that every transaction is different. Your final costs will depend on your lender, the property, and the terms of your purchase. Think of the estimates below as a planning guide—your lender’s Loan Estimate and final settlement statement will provide the exact numbers.
How Much Are Closing Costs?
A good rule of thumb is to budget about 2.5% to 4% of the purchase price for closing costs, not including your down payment.
For a home priced around $1.4 million to $1.5 million—roughly San Jose’s median home price—that works out to approximately $35,000 to $60,000.
It’s a significant amount, which is why it’s important to plan for more than just your down payment when preparing to buy.
What Do Closing Costs Include?
Loan Fees
Your lender will charge several fees to process your mortgage. These may include:
- Loan origination fees
- Appraisal fees
- Credit report fees
- Underwriting fees
- Rate lock fees or discount points (if you choose to lower your interest rate)
These costs can vary from one lender to another, so it’s worth comparing Loan Estimates before deciding who to work with.
Title and Escrow Fees
Escrow is the neutral third party that manages the funds and paperwork during your transaction. The associated fees are often shared between the buyer and seller, although that’s negotiable.
You’ll also pay for owner’s title insurance, which protects you from ownership disputes or title issues that may arise after closing. In San Jose, it’s customary for the buyer to cover this one-time cost.
Prepaid Expenses
Some costs aren’t really fees—they’re prepaid expenses your lender collects upfront.
These often include:
- Several months of property taxes placed into your escrow account
- A portion of your homeowners insurance
- Prepaid mortgage interest from your closing date until your first payment
- Your first year’s homeowners insurance premium
Recording Fees
Santa Clara County charges recording fees to officially record your deed and mortgage documents. These are usually one of the smaller line items on your closing statement.
Transfer Taxes
Transfer taxes can be a little confusing because they’re specific to where you’re buying.
Santa Clara County charges a documentary transfer tax of $1.10 per $1,000 of the purchase price. The City of San Jose also charges an additional $3.30 per $1,000.
By local custom, the city transfer tax is often split between the buyer and seller, although the final arrangement is negotiated in the purchase contract.
If you’re purchasing a home priced above $2.3 million, San Jose’s Measure E adds an additional progressive transfer tax. While that won’t affect most first-time buyers, it’s helpful to know if you’re shopping in the luxury market.
Home Inspections
Technically, inspection costs aren’t part of your closing statement because they’re usually paid before closing.
Still, they’re an important part of your home-buying budget.
Depending on the property, you may pay for:
- General home inspection
- Pest inspection
- Roof inspection
- Sewer lateral inspection
- Foundation or structural inspections
HOA Fees
Buying a condo or home in a homeowners association? You may also pay:
- Prorated HOA dues
- HOA transfer fees
- Capital contribution fees
These one-time costs commonly range from $100 to $400, depending on the community.
How to Lower Your Closing Costs
While you can’t eliminate closing costs altogether, there are a few ways to reduce what you pay out of pocket.
Negotiate seller credits. If the market favors buyers—or a home has been sitting for a while—you may be able to negotiate for the seller to cover part of your closing costs.
Ask about lender credits. Some lenders will offset a portion of your closing costs in exchange for a slightly higher interest rate. Depending on how long you expect to keep the loan, this can sometimes make financial sense.
Explore buyer assistance programs. Programs like CalHFA’s MyHome Assistance Program may help eligible first-time buyers cover part of their down payment or closing costs. Since eligibility and funding can change, it’s always best to check with CalHFA or your lender for the latest information.
Compare lenders. Mortgage fees aren’t standardized. Getting quotes from two or three lenders can save you thousands of dollars over the life of your loan—and sometimes hundreds or even thousands in upfront closing costs.
Plan Ahead—and Leave Room in Your Budget
One of the biggest mistakes first-time buyers make is focusing only on the down payment.
In a market like San Jose, closing costs can easily reach tens of thousands of dollars. Planning for those expenses early helps you avoid surprises and gives you more confidence throughout the buying process.
The best place to start is by getting pre-approved and asking your lender for a detailed estimate based on your target price range. It’s also smart to leave yourself a little extra breathing room, since inspections, negotiated credits, and prorated taxes can all affect your final numbers.
Buying your first home is exciting, and understanding the costs upfront makes the entire process much less stressful.
If you’re planning to buy in San Jose and want a realistic estimate based on your budget, I’d be happy to walk you through what to expect and connect you with trusted local lenders who can provide accurate, personalized numbers.
