One of the questions we get on nearly a daily basis is, “What are your closing costs?” Because “closing costs” are, for the most part, 3rd party fees, we like to educate our borrowers through the home buying process by answering this question instead:
How much does it cost to buy a house in Florida?
In addition to your down payment, which for many 1st time home buyers is around 3.5% of the purchase price depending on the loan program, there are other costs involved with purchasing a home. From the time you go under contract until closing day, in order to keep your home buying process fun and stress free-it’s best to be fully aware of what to expect.
You’ve got your PROPERTY RELATED EXPENSES-like your appraisal and survey, which are included in “closing costs,” but you have some other property related expenses that you need to be prepared to have set aside for when you are ready to make an offer on a home. The most common upfront costs:
- Earnest Money Deposit – also known as an escrow deposit – that will accompany your offer or seller’s acceptance of your offer. This is how you show the seller that you are serious about this home and you are willing to put your money up in good faith. There is not a set amount for an earnest money deposit, but your trusted Real Estate Agent will be able to recommend an amount based on the negotiations at hand in combination with our guidance on the most suitable escrow deposit for your financial situation. Generally speaking, though, anticipate around 1% of the purchase price for your escrow deposit.
- Inspection Fees – According to the U.S Department of Housing and Urban Development, a typical home inspection costs $300 to $500. While we as your Lender get our property condition from the appraisal, you may want to get a home inspection for your own protection. If you have a pool, well, or septic tank, you might also get a more detailed inspection within the time frame allotted within your contract. Each of those inspections may cost additional money, and so it’s best to consult a licensed Home Inspector on those expenses. Your Real Estate Agent will also be able to recommend some Home Inspectors they’ve worked with and trust. In addition to saving you expenses for repairs you may not be able to see, there are also some parts of a home inspection report that could save you money on homeowner’s insurance.
And now we can dive back into how much to expect for Closing Costs.
Closing Costs are paid at the Closing of your real estate transaction. Closing occurs when the title of the property is transferred from seller to buyer and the keys are given to you. You will also have Closing Costs when you refinance as your home. To better help you understand the most common fees associated with closing your mortgage, I made this handy dandy infographic for your perusal:
Be prepared for your total cash-to-close, not just for Closing Costs.
Another large expense that is not considered “closing costs” but is a significant part of your cash-to-close are your Pre-paid items. Pre-paid items are just that-payments made in advance. They fund your escrow account for your property taxes and homeowner’s insurance. Once you put a home under contract, we update our initial Pre-Approval estimate to the specifics of your contract as well as the property itself, basing your Pre-paid items on the taxes and insurance of that property as well as the dates listed on your contract. Typically, one full year of homeowner’s insurance is collected and prepaid to your insurance company at closing plus an additional cushion for homeowner’s insurance and property taxes so that your escrow account has a healthy amount of reserves for your taxes and insurance to be paid monthly with your mortgage payment.
We, as the Lender, do not set Closing Costs, we just provide an estimate of the overall costs for your initial Pre-Approval. Once you are under contract, we work hand in hand with the Title company to collaborate on fees and expenses. The approximate percentage of “closing costs” range from 2.5% to 6% of the sales price, on average, depending on the sales price. I put that in quotations because when The Mortgage Mamas provide our Loan Estimates, we also include the estimate of Pre-paid items, which not all Lenders do. We believe in full disclosure from the get-go, which is why we’ve earned the trust of so many happy clients. After all, a happy client is a client for life! So, “closing costs” in our way of doing business, are actually more an overall cash-to-close estimate. While that might seem like a huge spread in percentages, understand that because of fixed costs from 3rd parties (appraisal, survey, title, etc), a $100,000 home may be closer to 6% “closing costs” whereas a million dollar home may be closer to 2-2.5%.
Work with Professionals.
There are a number of factors that determine what your actual cash-to-close may be, including but not limited to the type of loan, type of property/occupancy, and even credit score-these all play into your loan costs. So, while we would love our work family here at Home Team Lending to earn everyone’s business, we just urge you to make sure you work with a Lender you trust. We also believe that it is in your best interest to work with a Real Estate Agent when purchasing a home. Having a knowledgeable professional who understands the local market to negotiate on your behalf is key to success. Depending on the type of loan you have, a large chunk of those Closing Costs and Pre-paid items can be paid for by the seller. And, in Central Florida, where we do the majority of our business, it’s actually pretty common. So, working with a Realtor® you trust is also important.
We do not have an application fee, so if you are interested in learning more about getting Pre-Approved for a Mortgage we would love to hear from you.
You can call or text me at 407.702.7302 or my partner Britni at 386.237.1113, or email us at TheMortgageMamas@YourFloridaLoan.com for more information. We pride ourselves on being available for our clients and our Realtor partners 7 days a week. Buying a home is such an exciting process, we’d love to assist you with your next move.
Your Favorite Lender,