Closing costs can be a significant amount of money when buying a home and most of them come out of a buyer's pocket. Here are the typical closing costs charged in Florida, who pays what, and advice on how to save money when it's time to close on your new home.
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
According to a study from Bankrate, loan origination fees plus third-party fees for a closing in Florida 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.
While closing costs can be expensive, one of the largest mortgage expenses is the interest rate. Over the life of the loan, a few small percentage points can result in hundreds of thousands of dollars in interest payments.
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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 homeownership.
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 the savings don't stop there. If one of our Clever Partner Agents helps you close on your new property, you may be eligible for Clever Cash Back. Once the deal is done, we pay qualifying buyers cash back. This is an actual check we send to you — consider it a token of our appreciation.
Working with an experienced buyer’s agent ensures that you’ll find a home that you love at a price you can afford.