Louisiana Closing Cost Guide 2021

With its world-renowned Creole cuisine, live music and incredible festivals, and stunning scenery from the southern swamp to rolling hills in the north, it’s hard to beat life in Louisiana. If you’re a homebuyer putting down roots in Pelican State, make sure you’re saving not only for your new home down payment, but also for closing costs.

While saving on the down payment is at the forefront of homebuyers’ minds, closing costs are what often fall by the wayside. A 2017 survey found that 35 percent of Americans are surprised by how expensive they are. Another 17 percent didn’t even see this spending coming, according to a survey by ClosingCorp, which researches residential data.

Plan now to start saving because you’ll have to pay a lot of fees on closing day. Some expenses involve the services you will need during the home buying process, from creating your loan to appraisal and inspecting the property. Other costs you’ll incur are property taxes, HOA fees, and homeowner’s insurance. Ultimately, closing costs amount to two to five percent of your home’s purchase price, paid along with your down payment, making it a costly day of expenses.

So how much do closing costs cost in Louisiana? Here’s our guide on how much you should save.

How much are the closing costs in Louisiana?

Louisiana is the 23rd state with the highest closing costs: an average of $2,681 for a home priced at $164,586. That represents 1.63 percent of home prices, according to a 2021 report from ClosingCorp.

In terms of comparison, home buyers in New York spend $8,256 on closing costs, some of the highest in the country, while in Missouri, closing cost estimates are at $1,290. The national average closing costs for the purchase of a single-family home was $6,087 in 2021, according to ClosingCorp.

However, count on spending more than these estimates. ClosingCorp’s data excludes two key costs: loan origination fees and private mortgage insurance, which you’ll need to buy if you have a down payment of less than 20 percent of the home’s purchase price. Combined, these could add up to thousands of dollars.

You’ll also need to factor in state-specific expenses. In Louisiana, that could mean a flood certification and any additional home insurance policies you need to purchase.

Home values also rose stealthily at Pelican State: The median price of a single-family home was $264,984 in 2021, according to Louisiana Realtor statistics. If homebuyers must put two to five percent of their home’s purchase price toward closing costs, estimates would be around $5,299 and $13,249.

Keep in mind that closing costs will fluctuate based on the price of your home, its location, and the complexity of the sale. Closing a luxury home in the heart of New Orleans will cost a small fortune compared to a single-story home in St. Francisville, for example.

What is typically included in Louisiana’s closing costs?

Closing costs can be grouped into three categories: property-related charges, mortgage-related charges, and annual recurring charges. Pelican State also has its own set of nuanced rules about who pays what.

Here’s what you can expect from Louisiana.

Mortgage-related charges

Loan Origination Fees

Unless you’re buying a home with cash, your first stop in the home buying process will be with a lender to apply for a mortgage. Your lender will charge loan origination fees to set up your application, from underwriting your loan to checking your credit history and processing your financing.

Loan origination fees are typically 0.5 to 1 percent of your loan amount. With average home prices of $265,000, loan origination fees could be $5,300 to $13,250, depending on the home’s reference price.

Credit Report Fee

Before your lender decides that you are a responsible borrower, you will need to perform a full credit check that includes getting your credit score to get a clear idea of how you manage the debt.

Expect your lender to pass on the cost of requesting your credit report. If there is more than one borrower, double this cost.

Private Mortgage Insurance

If you don’t provide a 20 percent down payment, your lender will expect you to purchase private mortgage insurance. PMI allows borrowers to qualify for a conventional loan, even if they pay only five to 19.99 percent of their mortgage.

While you are the one who pays for the insurance, the coverage is for your lender. Since you haven’t made a 20 percent down payment, the PMI protects your lender in the event of a loan default.

This cost is not included in ClosingCorp’s closing cost expense count, but the PMI typically ranges from 0.25% to 2.25% of your balance, depending on the size of your down payment and your credit score.

Once you pay 20 percent of your home, you won’t have to worry about PMI payments.

Legal costs

While in some states it is mandatory to hire a real estate attorney to help you with the entirety of your closing process, Louisiana does not have this requirement.

However, under state law, you will need a licensed attorney to examine and certify the title of your new home. Simply put, your attorney should examine the title search and title insurance policy to make sure you are buying a property that is free and clear and that your title insurance is up to date in case things go wrong.

You can also hire an attorney to draft and review purchase agreements, finalize the contract, and oversee the transfer of deed to closing.

Both attorneys and title agents can make closings. Typically, lawyers charge by the hour or ask you to pay an advance fee.

While it may seem expensive, having a real estate attorney on your side can give you peace of mind.

Escrow Fees

You may decide to hire a title company to help you with the closing process so you can get to closing day on time and seamlessly.

Your title company will establish an escrow account. The trust is a financial arrangement in which a neutral third party keeps your funds in a separate account; You will not pay your down payment, taxes, and other expenses until the contract is finalized. In this case, your securities company will hold the funds until both parties have fulfilled all of their conditions on the sale.

Your title company will walk you through the checklist of things you need to complete before closing.

Fees related to the property

Louisiana Real Estate Transfer Tax

Home buyers in Louisiana have a stroke of luck: It’s one of 13 states that doesn’t impose real estate transfer taxes.

Real estate transfer tax, also called deed tax, mortgage registration, or stamp tax, is usually added when the seller transfers the home to the buyer. It’s usually a percentage of the home’s purchase price, up to four percent. Some taxes are paid to the state and others to the county.

You’re saving money by skipping this step!

Looking for the title

You’ll need to pay for a title search, which involves searching for historical title documents to make sure the property is free and clear for you to own.

During the search, deeds, court records, property and name indexes, and other records are examined to confirm that the property has no pending property disputes, unpaid taxes, lawsuits, or ongoing lawsuits.

This is a crucial step that your lender can insist on before issuing your mortgage, whether you’re buying new construction or an existing home.

Title Insurance

When the title search is complete, you will need to back up this work with insurance suitable for both you and your lender, through homeowner’s and lender’s title insurance policies.

Your lender will require you to purchase title insurance before financing your loan, along with homeowners insurance and PMI.

It will cover you and your lender in case something is missed during the initial search. If something goes wrong, insurance will cover the courts and related fees.

Evaluation

Before your lender issues your mortgage, they will send an outside appraiser to the property to make sure the value is accurate.

If you default on your mortgage and your lender forecloses, they need to know that they can sell the property to recoup the cost of their loan.

The appraiser will scan the home to determine how it compares to similar ones in the community and determine its fair market value.

Your lender may choose the appraiser, but you are responsible for paying the bill.

Home Inspection

Termite checking, old appliances, a leaky roof – a detailed inspection of the house is your guardian angel before making the most important purchase of your life.

It is in your best interest to hire a professional home inspector to check the health and safety of your potential new home. Pay attention to your feedback: Your home inspector will point out any existing or potential issues in the coming years. This is valuable information because you can ask the seller to make any repairs before finalizing the deal.

Price points for a home inspection will vary, depending on the size of the property and where it is located.

Flood certification

Your lender may require you to spend $50 on a flood certification to categorize your home’s flood risk and insurance requirements.

Topography fee

ClosingCorp says Florida and Texas are the only states where surveying is mandatory for single-family homes. But some lenders in Louisiana may insist on hiring a property surveyor to check home boundaries. It may even be a mandatory step before issuing your loan.

Annual fees

Property Taxes

Property taxes are just one of many expenses you’ll need to factor into your annual budget as a new owner along with homeowner’s insurance and HOA fees.

Louisiana homeowners pay some of the lowest property taxes in the country: 0.51 percent of the assessed market value.

Count on paying this expense, prorated, at closing and then annually each December.

Homeowners Insurance

Homeowners insurance, which covers you in case something happens to your home, such as a fire, vandalism, or theft, is usually required by your lender before transferring your mortgage funds. You must have your insurance policy in place and paid for the next year before you move.

In Louisiana, you should check if you should add extended policies to your standard policy to cover natural disasters that are not covered in your standard policy. You may be in a flood zone, for example, where coastal flooding and storm damage can put your home in danger.

Make sure your insurance policy provides adequate coverage and stays up to date.

This is a prepaid expense, meaning it must be paid in full at closing and cannot be included in your home financing.

HOA Fees

About 10 percent of homeowners are members of a Pelican State homeowners association, so you may be required to pay this annual fee.

HOA fees cover the cost of the various services provided by your neighborhood, such as clubhouses, swimming pools, community parks, and gyms. They are also used to keep the community running with garbage disposal, security, and fire alarm systems. The more elaborate your HOA, the more you should expect to pay.

Upon closing, your seller will cover your outstanding balances to the HOA and then transfer the membership to you.

Ask upfront about HOA fees when buying a home to find out how much you’ll need to budget for and what it includes.

How can I reduce my closing costs in Louisiana?

If you’re wondering how you’ll get the cash to close your home, here’s a rundown of the key strategies homebuyers should try to save thousands of dollars.

Closing cost assistance

Making use of homeowner assistance programs in Louisiana is the most efficient way to achieve the greatest reduction in closing costs.

Your first stop in your search for closing cost assistance should be the Louisiana Housing Corporation (LHC). First-time homebuyers who meet income requirements can apply for programs that offer down payment assistance and closing costs in the form of a second mortgage or deferred loan. The LHC also offers statewide programs with closing cost assistance for repeat homebuyers.

Also look for regional programs. From Alexandria to New Orleans to Jefferson Parish, funds are available for assistance with closing costs.

Focus on your finances

Get your finances in shape before you start looking for a mortgage. Stay on top of your existing loans, pay off your debts to keep your debt-to-income ratio low, and don’t apply for more credit before you present your case to lenders.

Your goal is to secure a low interest rate, which could save you thousands of dollars over the life of your mortgage.

Save as much as you can, too. The closer you get to the 20 percent down payment threshold, the less you’ll have to pay in PMI. Even if you only have a 15 percent down payment, once you reach the 20 percent equity mark as a homeowner, you’ll be PMI-free.

Compare services

Look for the best interest rate for your mortgagor for any other service providers you need during the home buying process.

Read reviews, check references from friends and family, and check service provider accreditations. Then get quotes to find the best deal.

Negotiate loan fees

Consider your relationship with your lender. Are you a regular or long-time customer using multiple loan products that are in good standing? You can ask your lender to omit certain expenses from your final mortgage loan bill. The lowest fruit you can target is fees that are labeled “junk fees,” such as rate lock fees, loan processing fees, and broker repayments.

You can also ask your lender to stagger these expenses, so that they are paid during the home buying process in stages rather than at closing.

Concessions from the seller

There is always wiggle room when you are negotiating the sale of a home, especially if you are in a buyer’s market where the seller or builder is eager to make the sale.

Negotiating the price and compromising who pays what on closing costs are a routine part of the home buying process. Don’t hesitate to ask your lender to pay some, or all, of your closing costs, especially if they offer to submit a full-price offer. You can also ask them to cover some of your closing costs if your inspector flagged problems that needed repairs or if you choose to pay a premium for upgrades on new construction.

In other words, there are a handful of different scenarios where you could ask the seller to share expenses.

Adding Closing Costs to Your Home Financing

Homebuyers who can’t scrape together the cash for closing costs may choose to transfer this expense to their mortgage loan. This way, you don’t have to pay the closing costs tab on closing day, but the total will be added to your monthly mortgage payments.

This is a convenient alternative to pay closing costs in advance. The low? You will pay interest on closing costs for the life of your loan.

This option may not be available to all homebuyers.

Mortgages with no closing cost

Another solution you can present to your lender is a “no closing cost” mortgage. In this scenario, your lender agrees to pay a portion, or all, of your closing costs. In turn, you pay a higher interest rate on your mortgage.

Run some calculations before deciding if this is the best route to take. In the long run, this option could cost you more money due to the increase in your interest rate.

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By Catharine Bwana