Closing Costs: Who Pays What in Arizona
First-time buyers are often surprised at closing costs because they budgeted for the down payment and nothing else. Closing costs are a separate line item, and while some of them can be negotiated into the transaction, they do not disappear. Know them before you write an offer.
Typical Buyer Closing Costs
Buyer costs fall into several categories: lender fees (origination, underwriting, processing), prepaid items (homeowner's insurance premium, property taxes into escrow, prepaid mortgage interest from closing to month's end), title and escrow fees (buyer's portion), and recording fees charged by the county.
The total varies by loan type, lender, purchase price, and what is negotiated. Your lender will provide a Loan Estimate within three business days of your application -- this is the document to review carefully. You will also receive a Closing Disclosure at least three business days before closing with final numbers.
Typical Seller Closing Costs
Sellers typically pay: real estate agent commissions (now increasingly negotiated individually with each agent), title insurance for the owner's policy (Arizona custom), transfer taxes (state and county), any agreed-upon repairs or credits from the BINSR negotiation, and prorations for property taxes and HOA dues.
The seller's net proceeds are what remains after payoff of the existing mortgage, all closing costs, and any concessions agreed to in the contract. I provide sellers with a net sheet before listing so there are no surprises.
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What Is Negotiable
Seller concessions toward buyer closing costs are a common negotiation point, especially in markets where sellers have motivation to help buyers get to the table. A seller can credit the buyer a fixed dollar amount or a percentage of the purchase price toward closing costs -- this is negotiated in the offer.
Lender fees can sometimes be negotiated or offset by accepting a slightly higher interest rate (a 'no-cost' loan structure). The tradeoff is a higher payment over the life of the loan versus lower cash needed at closing. Run the math based on how long you expect to stay in the home.
Reading the Closing Disclosure
The Closing Disclosure (CD) is a five-page standardized document your lender provides three business days before closing. It shows every cost, credit, and proration associated with the transaction. Compare it to your original Loan Estimate and flag any fees that changed significantly.
Look especially at Section A (origination charges), Section B and C (services you did and did not shop for), and the cash-to-close summary on page one. If a number changed from your Loan Estimate and you do not understand why, ask your lender before you show up at the title company.
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Written by
Jon Hegreness
REALTOR / Associate Broker, Howe Realty. AZ License BR540940000. 24 years in Phoenix Valley residential real estate.
I am a full-time Valley associate broker, not a call center. If anything here raised a question about your own move, ask me and you get a straight answer from the person who wrote this, every time.
Common questions
- How much are closing costs in Arizona?
- They vary by loan type, lender, and purchase price. Buyers should budget for both lender fees and prepaid items. Your Loan Estimate will give you specific numbers. Do not rely on a percentage rule of thumb -- get actual figures from your lender.
- Can the seller pay my closing costs?
- Sellers can contribute toward buyer closing costs as a concession negotiated in the purchase contract. This is common and can be structured as a dollar amount or a percentage of the price. There are limits based on loan type and down payment -- your lender can tell you the maximum allowable concession for your loan.
- What are prepaids and why do I have to pay them?
- Prepaids are funds collected at closing for costs that come due soon after: homeowner's insurance premium, initial property tax escrow deposits, and prepaid mortgage interest from closing date to the first day of the following month. They are not fees -- they are your own money being held to pay upcoming bills.
- What is the difference between a Loan Estimate and a Closing Disclosure?
- The Loan Estimate is provided early in the process and gives you projected costs. The Closing Disclosure is the final version provided at least three business days before closing. Compare the two and ask your lender about any significant differences.
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