Updated: Jun 13
Louisiana is home to the United States' most unique culture. The fusion of Creole and Cajun cultures combine with historical African, French, and Spanish influences. And Americans love it. Year after year, the New Orleans area ranks among the most visited cities in the entire country.
Combined with warm weather, mild winters, and a lower cost of living than the national average, Louisiana may be a great option to stretch your home budget a little further.
Remember when you buy in Louisiana, you'll need to budget to cover your closing costs.
What are closing costs?
Closing costs are the list of fees and expenses that you'll incur as a result of buying (or selling) real estate. During any real estate transaction, you'll need to pay for a bunch of different services that will be payable at the time you close.
Buyer costs includes fees that fit into these three categories:
Fees paid to your mortgage lender/bank
Title fees assessed by a title company or real estate attorney
Typically, you'll bring a bank check to your closing for the entire amount, though you may also be given the option to wire the money as well.
How much are buyer closing costs in Louisiana?
Keep in mind that, in any real estate transaction, there will be closing costs incurred by both buyers and sellers. It is common for home buyers to incur costs related to getting a mortgage and satisfying all lender requirements for a transition of sale (things like home inspections, appraisals, and title searches). You'll also need to prepay some months of property taxes.
Sellers on the other hand incur expenses regarding realtor fees, and their own set of settlement and title fees. The remainder of this post will focus solely on buyer closing costs.
In Louisiana, home buyer closing costs seem to average around 3% of your home's purchase price, but you may encounter expenses between 2-4%, depending on the purchaser price of your home.
The exact amount that you pay is dependent on so many different variables. Even seemingly inconsequential factors, like who you pick to complete your title search, can make a difference. Usually, though, there are three variables that have the largest impact on what you'll owe.
These three factors include:
The property taxes in the town/city of your new home
Your closing date
Whether your new home has a HOA
1. Property taxes in Louisiana
LA has the fifth lowest property tax rate of the nation's fifty states, according to SmartAsset. Of course, just like any other state, tax rates can fluctuate greatly from town to town.
Consider Louisiana's five highest parishes by property tax - St. Tammany, Orleans, Caddo, Cameron, and St. Charles. These five parishes have an average effective property tax rate of 0.70%, meaning that a home valued at $350,000 will cost about $2,450 annually in property tax.
Compare this to Louisiana's five cheapest parishes - Pointe Coupee, Acadia, Catahoula, Concordia, and Iberville. These five parishes have an average rate of 0.27%, meaning that the same $350,000 home will cost about $945 in taxes.
Considering that you'll likely need to pay multiple months of property tax at close, differing tax rates can make a huge difference in your ultimate closing expenses.
2. Your closing date
Did you know that the actual date that you close also plays a significant role in determining your closing costs? This is because you'll need to prepay mortgage interest for the remainder of the month of your closing. In fact, this is the only time throughout the life of your mortgage that you will need to prepay mortgage interest.
Because of this, it is really common for buyers and real estate attorneys alike to schedule closings as close as possible to the end of a month. And considering that even very manageable mortgages carry high interest payments over the first few years, this could help lower your total fees by $1,000 - or even more!
3. Homeowner's associations (HOAs)
Another easy to track determinant in your closing costs is whether your new condo or home is part of a broader HOA. If so, you'll need to budget some extra money in your expenses, since you'll need to pay for some extra fees. These expenses are HOA specific, but will likely include some sort of HOA transfer fee. Most times, it is only a few hundred dollars, but it is something to keep in mind regardless.
Closing costs in Louisiana by category
Remember - your expenses can likely be bucketed into one of three categories - those that will be paid to your lender, those that will be paid to your title company, and those that will paid to third parties to fulfill requirements needed to officially complete the real estate transaction.
1. Fees assessed by your lender
Unfortunately, your bank/lender is not going to process your mortgage application and issue your mortgage for free. You'll incur all sorts of different charges here, none of which will be as large as your loan origination fee, which usually costs about 1% of the loan amount.
In addition to the loan origination fee, you're also going to be financially responsible to pay the following (along with rough estimates of the charges):
Application and underwriting fees - $500 or so
Title insurance - $500 or so
Credit reporting - should be less than $100
Prepaid mortgage interest - for the remainder of the month of close
2. LA title fees
You're also going to incur legal fees from your title company or real estate attorney. You're going to need to have a title search completed in order to assure that there are no liens, legal problems, or anybody with a legal right to the home (other than the seller/sellers).
In Louisiana, your title search will most likely cost you a few hundred dollars, though you will also need to pay recording fees to have your home deed and title updated in town/parish records where you live.
3. Property fees
Third, and finally, you're also going to need to finance other services to get the home ready for a transfer in ownership. Your lender will mandate that a home appraisal is completed to assure that they are not lending you more money than the home is intrinsically worth. This will likely cost a few hundred dollars.
But you should also be prepared for the following other fees:
Establishment of an escrow account - you'll be asked for a number of months of property taxes, as well as one year of prepaid home insurance with an accredited insurance company
Surveying fees - to mark your property lines
Other miscellaneous add-ons
Finally, while not technically a closing cost, you'll also want to have your new home inspected to ensure that there are not costly deficiencies that you are unaware of.
Related: Here is what your home appraiser will look for
Louisiana closing cost assistance
It's no surprise that buying a home can be incredibly expensive, and things like closing costs are hard to afford and can be easy to forget. Luckily, organizations across the Bayou State offer assistance to qualifying home buyers to aid in affording these costs.
The Louisiana Housing Corporation (LHC) offers two such programs. Both programs will require you to meet specific eligibility criteria. Your lender can help you determine if you qualify.
1. LHC Resilience Soft Second Program
Those that purchase homes in parishes impacted by LA's Great Floods of 2016 may qualify for up to $55,000 in down payment and an additional $5,000 in closing cost assistance. Resilience Soft Second offers low interest rate mortgages through the Conventional, FHA, VA, and USDA loan programs.
2. LHC Soft Second Program
LHC's Soft Second Program is available to buyers within Hurricane Isaac designated disaster areas across the state. It operates similarly to the Resilience program, providing up to $30,000 in down payment and an additional $5,000 in closing cost assistance, along with 30-year fixed rate mortgages through the Conventional, FHA, VA, and USDA programs.
Lower your Louisiana closing costs
We are asked all the time by our readers about how to lessen the amount of your closing costs. And while there is no magical strategy that will cut what you need to pay by 50%, there are a number of smaller steps that you can take to maintain as much financial flexibility as possible as you buy your home. Among those strategies that we recommend include:
Closing as late in the month as possible
Picking the right mortgage lender and title company
1. Close late in a month
Many home buyers don't realize that the month in which you close is actually the only time that you'll ever prepay mortgage interest in the course of your mortgage repayment. So if you close on the 1st or 2nd day or a new month, you'll actually be making almost an entire mortgage payment before you even move into your new home. On the contrary, closing at the end of a month will only leave you with a day or two of interest to prepay.
2. Louisiana mortgage lenders and title companies
The mortgage lender and title company/real estate attorney that you pick can also play an outsized role in determining how much money you'll need to close. And while most lenders will charge a percentage based loan origination fee, usually between 0.5%-1% of the loan amount, there are definitely lenders that charge on the lower end of this range, and in some rare instances, you may find a flat or even zero origination fee!
Among those lenders with the lowest origination fees that we've seen include:
Ally Bank - they currently offer no lender fees!
PenFed Credit Union - no loan origination fees
Navy Federal Credit Union
But conduct your own research on lenders and title companies too!
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