A typical mistake of first-time homebuyers is not calculating the extra money required besides the down payment and the mortgage loan. Generally, the Buyer of a property will need to set aside between 2% & 4% for the closing settlement (or roughly 1% for Cash deals). On the other hand, the Seller will have to pay his closing fees as well, including 6% of the propertyâ€™s selling price in Brokerage Commissions. Even though each party is typically responsible for specific closing costs, some charges can be negotiated. Below, you will find explanations for common Closing Costs in the State of Florida:
Title Insurance: protects an owner or a lender against loss of rights to own a property due to title defects, liens or other matters such as fraud, foreclosures, mistakes in recording legal documents, forged deeds or misinterpreted deeds/releases/wills. This insurance does not eliminate title defects that may surface later but, it will defend against a lawsuit attacking the title or reimburse the insured for the monetary loss incurred (up to the dollar amount covered). For loans, there will be a title insurance policy covering the lender for the amount of the borrowed funds, and another policy covering the new owner up to the full purchase price. Title insurance can be paid by either the Buyer or the Seller and, here in Florida, it is often dependent upon what County the property is located at. For example, for Miami Dade and Broward, the Buyer generally pays for this expense. In Counties like Palm Beach, Monroe and Orange, it is common for the seller to pay. Typically the most expensive of closing costs, its premium is calculated based on the purchase price as follows: up to $100,000 = $5.75 per thousand, over $100,000 = $5.00 per thousand (ex: $100,000 = 575.00; $200,000 = $1,075.00).
Documentary Stamp Tax on Deed: Generally a Seller cost, it is a tax charge by the local government to record the transfer of the property and recording it publicly. The rate is $.70 per $100 based on selling price (for Miami-Dade counties it is $.60 per $100).
Documentary Stamp Tax on Mortgage: A Florida tax on a new mortgage based on its amount. Charged at a rate of $.35 per $100. Buyerâ€™s expense.
Intangible Tax on the Note: Florida tax on new loans. Charged at a rate of $.2 per $100 or $2 per $1,000.
Lender Fees: These may vary depending on the lender. Typically include items like: Credit Report, Loan Origination fees, Appraisal, Underwriting, Document Preparation, Tax Service, Points (paid by borrower to the lender in exchange for lower interest rate), Prepaid Interest (from closing date to end of month), Flood Certification, and PMI (if down payment is less than 20%). Remember that within 3 days of applying, your loan officer should provide you with a Good Faith Estimate of closing costs.
Survey: For houses, almost always required when financing. Shows lines, limits, setback lines, easements or encroachments like neighboring fences and drainage/utility easements. Cost around $400, but could be much more for waterfront houses or large & complex lots.
Appraisal: One of the fees charged by the lender in order to see if the property is worth what the buyer is paying for it. Fee starting at $350 and increasing depending on the type of property.
Recording Fees: Recording a Deed costs about $30 and recording a Mortgage $200 and up.
Home & Pest/Termite Inspection: Usually around $350 or more, paid by the Buyer and highly recommended. A professional home inspector will check structural & physical systems including roof, plumbing, electrical & cooling/heating systems, floors, foundation, surfaces, walls & paint, doors and windows. The pest inspection looks for Termites/Wood Destroying Organisms (WDO), rot and fungal decay in wood. A thorough mold inspection can be done for an additional cost.
Homeowners and/or Condo Association Application, Dues and Transfer Fee: Buyer must apply to the Association and get approved before moving in. Also, some HOAâ€™s charge fees to transfer ownership. Finally, it is important to confirm all amounts paid and due, if any, from the seller to the Association.
Overnight Delivery charges: by Title Company to overnight closing packages or payoffs.
Escrow Items: money that could be used to pay for property taxes and insurance if the borrower is late on payments or defaults on the loan.
Other Seller Expenses: Such as Payoff of Existing Mortgage(s), Homeownerâ€™s Association Estoppel fee (HOA payoff statement), HOA dues prorated to closing date, Taxes prorated to closing date, and lender fees or charges if any.
Attorney Fees: If required by Buyer and/or Seller during the transaction.
Settlement or Closing Fee: Charged by Title Company or Closing Agent to Buyer and/or Seller. Includes all administrative services performed in order to clear and report all matters & requirements involving all key players in the transaction.
by Adrian Morales Dobrzynski