Closing Day Costs:
- Down Payment. The down payment can be anywhere between 0%-20%+ of the purchase price depending on the loan program you choose. Putting down a higher amount may get you a better interest rate. Not all lenders are created equal and each lender will offer different loan programs with varying down payment requirements.
- Title Insurance Policy. A title insurance policy is typically required when getting a mortgage, and is well worth the cost when considering what could happen to your investment if someone comes along after the sale and makes a valid claim against the property. The cost of the insurance policy in Florida depends on the purchase price. For purchase prices up to $100,000 figure $5.75 for every $1,000. For purchase prices over $100,000 figure $5.00 for every $1,000.
- Closing Fee. This is the fee the title agency or attorney’s office charges to perform the closing. The closing agent prepares all of the documents for closing, orders the title insurance policy, does searches to clear the title of any encumbrances, orders survey (if necessary), receives the lender’s closing packet, goes over all of the paperwork with you, has you sign in designated areas, notarizes all of the closing paperwork and then records the required paperwork with the county on your behalf. This fee typically ranges from $350-$800 and can include courier fees, recording fees, lien search fees, etc.
- Property Survey. The survey is used to show the buyer and the title insurance provider what, if any, encumbrances exist on the property. Examples of an encumbrance on a property could be utility easements, encroaching fences or buildings over the property line, or an easement for access through a property to another parcel. The fee is typically $300-$500 depending on the size of the property.
- Documentary Stamps & Intangible Tax. These fee’s are charged when you are getting a new mortgage to purchase the property. These fee’s are based on the mortgage amount as follows: Doc stamps = .0035 x Mortgage Amount; Intangible Tax = .002 x Mortgage Amount.
- RE/MAX Alliance Group Brokerage Fee. This fee, like the majority of other national and local real estate companies, is what I like to call a “quality control” fee. This fee is for the transaction coordinators within the company who review all of the contract paperwork that comes in and confirms all required items are filled in and signed correctly. Our fee may be the lowest in our area. $295
- Homeowner’s Insurance Policy. If you are purchasing a home with a mortgage you will be required to secure a home insurance policy to protect the home and property against damage and liability. Home insurance costs vary significantly. It is best to reach out to an insurance agent as soon as you get a house under contract to determine how much your policy will be. If you are getting a mortgage the lender will require the 1st year policy to be paid at that time. Depending on how much your down payment is you could also be required by lender to add 3-6 months of payments into an escrow account as cushion and will be disbursed on your behalf when the policy renews.
- Property Tax Escrow. If you put down less than 20% (down payment) of the purchase price, lenders typically require the buyer to add 3-12 months worth of property taxes and put that amount into an escrow account as a cushion. These extra funds will be disbursed on your behalf when the lender pays your property tax bill. They use the previous years tax bill as a guide for how much to collect.
- PMI Escrow. As above, if you don’t put down at least 20% the lender may require mortgage insurance for the loan. You will have to pay the premium in full for the first year and then add a 3-6 month cushion depending on the type of financing you use.
- Lender Fee’s. These are fees the lender charges you to put together your loan. Some of these fees are for your credit report, processing the loan & pre-paid interest. The lender is required to provide you with a Good Faith Estimate upon submitting your application that shows these fee’s and others mentioned within this post.
- Loan Down Payment. This amount can vary by your credit worthiness, financial standing or specific qualification for special loan programs. Some can qualify for 0% down, others 3.5% down. To get the best interest rates without paying points, and to avoid a mortgage insurance payment, you will want to put down at least 18%+.
- HOA Application Fee. This fee, if it is required, comes directly from the HOA and covers administrative costs to review your application. It is typically $100 or less.
- HOA Pro Ration/Condo Fee’s. These fee’s are typically paid in advance, so the seller has probably already paid this fee for the year, quarter or month. Whatever the seller has already paid, that you will now be benefiting from, will need to be repaid back to the seller at closing.
- Miscellaneous Fees. These fee’s can vary depending on each lender, but if you see an application fee or rate lock fee you can ask the lender for clarification.
A good rule of thumb to guesstimate your closing costs is to figure 3% of the purchase price. While this isn’t an exact science, it will give you somewhat of an idea of what the total cost could be. Then, add your down payment percentage on top of that. Voilà!
While you may have enough in savings to cover the closing costs and down payment, you may not want to exhaust your entire savings account in the process. There are certain ways to get help covering these costs, but they will still cost you something. You could ask family member for help. You could ask the seller to contribute (though they may require you to pay a higher sale price). Another source of funds are local government grants and down payment assistance programs set aside for individuals with certain income and credit limits.