After years of scrimping and saving, you finally have the 20% down payment for your first home. It’s time to pick up the phone, call a realtor, and start looking at houses! Or is it?
There are additional, out-of-pocket, costs that a home buyer will incur during the home buying process. Closing costs alone can add thousands to your sale price. It’s a good idea to do your homework so that you’re prepared when you enter the market. An experienced, local real estate agent can help you set realistic explanations on the additional costs involved in Florida.
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Closing Costs for Florida Homes: What to Expect
The paperwork involved in selling a house can be inches thick, and will pass through several hands. Each of those professionals must be paid for their time. The title search company will charge a fee. The state charges taxes on the sale and to record the transaction. If someone is reviewing your paperwork, their fee will be included in closing costs.
There will also be fees associated with your mortgage, which the buyer always pays. These range from points (interest) paid up front, loan origination fees, and escrow deposits. And while a $300 application fee may not seem like a lot, these fees add up.
According to a study from Bankrate, origination plus third-party fees for a closing in Florida are on average $2,206. Actual closing costs are almost guaranteed to be higher, however, because this study didn’t account for variable costs such as title insurance, title search, taxes, other government fees, escrow fees and discount points.
Closing costs average 1.98% of the home’s purchase price. With a median home value in Florida of $233,700, your closing costs could be over $4,600. In order to achieve your dream of home ownership, don’t forget to include closing costs in your budget.
Common Closing Costs for Florida Home Buyers
In general, buyers pay more than sellers in closing costs, often 3-4% of the house’s value. This is because many of the closing costs are associated with the mortgage.
Lenders can charge loan origination fees to process your loan’s paperwork. They might have already charged you an application fee and credit-check fee when you first applied. Depending on the bank, you could pay both an underwriting fee to the underwriters who assess your creditworthiness and an appraisal fee.
In Florida, the state requires a flood certification and charges real estate transfer taxes. You’ll also have to pay title search fees and title recording fees.
Some closing costs can be negotiated with the seller if you’re in a buyer’s market. They can contribute some of the home’s sale price to cover these fees, but not in every state. Your real estate agent will know which costs can be negotiated or reduced.
Other Costs to Consider
Closing costs aren’t the only expense that future homeowners should consider. In addition to title transfer fees and taxes you should make sure that you can cover all the costs of home ownership.
Many lenders require that you put some or all of the property taxes on your new home in an escrow account at closing. If you fail to pay your property taxes, it could lead to a lien against the property which is their collateral for the loan. These will be added to your closing costs.
They also require a portion of your homeowners insurance be paid in advance, for a similar reason. The collateral for a mortgage is the physical property and land of your home. If you fail to obtain a homeowners insurance policy, or the appropriate amount of coverage, and something happens to your house the bank’s asset is now at risk.
Once you’ve moved into your home, you might be surprised to find out the utilities can be expensive. This can cause a lot of sticker shock for renters who previously had heat and electricity included in their rent. Ask the home seller to provide you with an estimate or average of the home’s utilities over the past year so that you can factor them into your home ownership budget.
Lastly, don’t forget about maintenance costs. The furnace could break in the middle of December, or a sump pump could fail. Winter storms could damage your roof, and homeowner’s insurance policies don’t always cover storm damage. Plan on setting aside at least 1% of your home’s value for maintenance costs every year.
The decision to purchase a home carries with it a lot of responsibility. Before signing on the dotted line, ensure your financial stability and put all these costs into your budget.
How to Save on Closing Costs in Florida When Buying a Home
One of the biggest ways to save on closing costs is to pay less for your home. Easier said than done, right? But if you work with a real estate agent who’s an expert in negotiations they can help you negotiate a lower price at several points during the process.
Drawing on their knowledge of the local market and selling prices, they’ll help you know what to offer. The home inspection could also present opportunities for negotiation. For example, the home inspection may reveal items that need to be fixed but aren’t that important to you. But your realtor can still use them to knock down the price.
Also consider the timing of your closing. You can save money by simply arranging to close at the end of the month. That’s because you’ll pay less in accrued interest for the days that you own the home that month.
There are also closing cost assistance programs available to help home buyers. These can take the form of grants or no-interest loans. Florida’s housing authority offers second mortgages which can be used to cover closing costs. While they’re only for first-time home buyers, there are exceptions if you’re purchasing a home in designated counties.
Clever Partner Agents are some of the best in the business. They save you money throughout the home buying process, but also at closing. Agents in our network agree to offer a Home Buyer Rebate to buyers. This $1,000 rebate can be applied to closing costs.
Working with an experienced buyer’s agent ensures that you’ll find a home that you love at a price you can afford.