If you’re currently going through the home buying process you might have already figured out your ideal total mortgage payment, mortgage interest rate and how much money you want to initially place for a down payment. But have you considered closing costs? These fees can quickly add up to become a sizable amount of money that needs to be paid to finalize your home purchase transaction.
Keep in mind every transaction is different and might not include certain fees as listed below. However, your closing cost generally consists of charges from your Lender/Broker, Closing Agent (Title Company or Attorney’s Office), Third Party Vendors such as a survey company and from the State and Local Government for which the property is located.
Sections of the Closing Disclosure Statement for Buyers (based on Broward County FL).
Keep in mind fees vary between different counties/states and some fees won’t apply to every transaction. The closing disclosure is the final document you will receive that will outline all costs associated with your home purchase.
Origination fee- A lender’s charge to a borrower for making the loan. Services include taking and processing your loan application, administrative task, underwriting and funding the loan.
Appraisal – Verifies the market value of your new home.
Flood Certification – To determine if flood insurance will be required depending on whether the property is located in a flood zone or not.
Credit Report fee- To verify your existing monthly debt obligations and to retrieve your credit scores from TransUnion, Equifax and Experian.
Settlement fee- Title Company or Attorney charge to process and close the transaction (varies among closing agents).
Title Search – A search of the county public records to discover any recorded liens and judgements attached to a property. This fee can be either buyer or seller paid depending on the negotiations during the contract phase.
Municipal Lien Search – A search of the city or municipal records to discover issues having to deal with permits, code violations, past due utility accounts etc.
Lender’s Title Insurance – Once there is a mortgage loan involved in the transaction then a lender will require the borrower to purchase this insurance policy. This protects the Lender’s interest in a property against any possible future claims regarding any defects on title.
Taxes and Other Government Fees
For financed transactions, a documentary stamp tax is due when a new note is issued. The Loan amount is used to calculate this tax. In Broward County at the time of this writing the rate is $.35 per $100.
FL Intangible taxes are due when a new mortgage is issued. In Broward County, FL the tax is calculated by multiplying the loan amount by .002 (2 mills per each dollar of the just value of the note secured by the mortgage).
Initial Escrow/Prepaid Fees
Lender’s require an initial escrow deposit to start your escrow account to pay for your property taxes and homeowners insurance when they come due.
Typically, you will need to pay the interest on your loan between the time you close and the end of that month. It is also common to pay the first year’s homeowner’s insurance premium in advance into an escrow account.
In this section on a buyer’s Closing Disclosure, listed are miscellaneous fees for items such as a survey, warranties for home appliances and the Premium paid for your Owner’s Title Insurance Policy.
In the end, home buyers typically pay between 2-5% of a property’s purchase price in closing fees. Before finalizing your transaction to buy your home, make sure you get a clear understanding from your lender/broker or closing agent representative of how your closing cost is calculated and the reason for each charge. This will ensure that you are aware of how much cash is needed to close and prevent you from overpaying for any unnecessary items when purchasing your property. Contact Us TODAY to assist with your next home sale/purchase or when you are applying for a mortgage loan.
Disclaimer: The list of fees shown above in this blog article is not to be relied upon as legal or accounting advice as it relates to closing on a real estate transaction. This article is merely a guide to give the reader a general idea of what to expect to pay for closing costs as a purchaser of residential real estate property in Broward County FL. Please consult an Attorney or Accountant for any legal or tax representation.