The housing market in Arizona is once again one of the hottest in the country. After suffering through the worst pain the housing bubble could inflict, the median home value is creeping back over $200,000, a level not seen since 2008, but still far below its pre-housing bubble peak of $264,000. Sales activity is up, as is new home construction. Owner-occupant buyers outnumber distressed property investors for the first time in a while, which is a healthy sign. However, buying a home in Arizona is not without its challenges. Not only are homebuyers faced with rising home prices, tougher loan requirements are keeping many first-time homebuyers at bay. Those who do qualify must then contend with some of the highest average closing costs in the country.

Average Closing Costs in Arizona

Based on a $200,000 home purchase with a 20% down payment, homebuyers in Arizona pay an average of $1,208 in lender fees and $761 in third-party fees, for a total of $1,969 in closing costs. Only four states have higher closing costs: West Virginia, Hawaii, Connecticut and New Jersey. The national average is $1,847.

Breaking down the average lender fees, homebuyers pay $1,151 in loan origination fees, $76 for tax services and $60 for document preparation. Third-party closing costs include $419 for a home appraisal, $431 for settlement fees, $21 for a credit report, $10 for flood certification, $125 for pest inspections, $100 for postage or couriers and $620 for a survey. Title insurance fees aren't included in these averages due to lenders having difficulty in estimating them, but they can add up to $1,000 to final closing costs. Prepaid items such as property taxes and homeowners insurance are also not included.

What Goes Into Closing Costs

Closing costs in Arizona can vary across the state and by lender. For most properties, homebuyers can expect to pay between 2 and 5% of their home's sale price in closing costs. These are typical of the closing costs they see on their good faith estimate provided by the lender.

Loan Origination Fee: The loan origination fee covers most of the lender’s costs in originating, underwriting, processing and funding the loan. The fee is often quoted as a percentage of the loan, or as points, with the typical fee amounting to 1% or 1 point. Homebuyers can often reduce their loan interest rates by agreeing to pay additional points, which are added to the closing costs.

Appraisal Fee: In Arizona, lenders order an appraisal to verify that the value of the home is worth at least the sales price and is reasonable based on recent sales of comparable homes.

Tax Service Fee: Because mortgage loans are subordinate to property tax liens, lenders pay an independent tax service to monitor a homebuyer's property tax payments to ensure they are current.

Closing or Settlement Fee: This fee covers the legal aspects of closing escrow, which is typically handled by the title company.

Title Insurance: Buyers are required to purchase title insurance to protect the lender against title defects. Sellers are required to buy title insurance for the buyer to ensure they have clear title to the property upon closing.

Home Inspection: Some lenders may require a pest inspection if any issues arise from the home appraisal. If a homebuyer wants the home inspected, it is the homebuyer's responsibility to cover the cost, which can be paid as part of the closing costs, but it is not included in the good faith estimate.

Survey: Depending on the type of property and its location, some lenders require a survey to verify property and building lines.

Seller’s Closing Costs

In Arizona, the seller is required to pay half of the escrow fees. The seller also pays for the sales commission, property taxes owed and a home warranty, if applicable. In addition, the seller must purchase title insurance on the buyer.


--Richard Best

Idaho (ID): Average Closing Costs

Related Articles
  1. Personal Finance

    How To Negotiate Your Closing Costs

    Closing costs can't be avoided altogether, but you can lower them. While there are a lot of fixed costs, there are also variable ones you can save on.
  2. Personal Finance

    Watch Out for "Junk" Mortgage Fees

    So many fees are tacked onto a mortgage, that it's easy to pay more than you have to.
  3. Personal Finance

    How Do Mortgage Lenders Get Paid and Make Money?

    When homebuyers educate themselves on how mortgage lenders get paid and make money, they are more likely to save thousands of dollars on their mortgages.
  4. Investing

    10 Hurdles to Closing on a New Home

    A home will probably be the biggest purchase of your life - find out what can go wrong before you even close the deal.
  5. Personal Finance

    Understanding escrow

    Are you in the process of buying a house? Here is everything you need to know about the escrow process, a step-by-step guidance of buying a home.
  6. Investing

    13 steps to closing a real estate deal

    A long list of things needs to happen before a home becomes yours. Find out what to expect when closing a real estate deal.
  7. Insurance

    5 Mistakes to Avoid When Buying a New Home

    Don't make these common blunders on your way to buying a new home.
  8. Personal Finance

    How to Lower Refinance Closing Costs

    Refinancing a mortgage can save you money but it isn't free. There are closing costs associated with a refinance and how much you pay for them depends on you.
  9. Investing

    Special Benefits for First-Time Homebuyers

    To encourage Americans to buy their first homes, the government offers credits and tax breaks. Here's the lowdown on who can qualify for each benefit.
Frequently Asked Questions
  1. How Do I Use Software to Make Arbitrage Trades?

    Understand the meaning of arbitrage trading, and find out how traders leverage software programs to detect arbitrage trade ...
  2. What is the difference between market capitalization and market value?

    Understand the difference between market capitalization and market value, including the elements used for the calculation ...
  3. How is an accrued interest entry made in accounting?

    Learn how to create common journal entries for accrued interest, including adjusting entries and delayed bond issues sold ...
  4. What's the largest charitable donation Warren Buffett ever made?

    Learn about Warren Buffett's biggest financial contributions and how his estate is to be divided between charity and Buffett's ...
Trading Center