As a BUYERS AGENT, I work with exclusively with BUYERS, so I wanted to write a blog to let BUYERS know what to expect for “THEIR CLOSING COSTS”. BUYERS should expect to pay about 6% of the purchase price for closing costs (which includes pre-paids for interest, taxes and insurance). This gives a general idea what to expect.
Here are some fees that are typical BUYER CLOSING COSTS:
Documentary stamp tax on the deed – Typically, but not necessarily, a seller cost. It is a Florida tax on the sale of real estate and is based on the purchase price. The rate is $.70 per one hundred dollars or fraction thereof. For example, on the $250,000 sale just discussed, the tax would be $1750. Although I usually ask that the seller pay this amount, it is not a given.
Documentary stamp tax on the mortgage - A Florida tax on new and assumed mortgages, based on the amount. The rate is $.35 per one hundred dollars, or fraction thereof. Let’s assume in the example above that the buyer got a conventional loan and put down 20% as a down payment. The documentary stamp tax on the loan of $200,000 would be $700.
Intangible tax on the note - This is a tax charged on all new loans. The rate is $.20 per one hundred dollars. The $200,000 loan would also be taxed an intangible tax of $400.
Lender fees – these can vary widely, depending on the lender. Some lenders offer a lower interest rate but charge more up front fees at closing. There are usually options to pay an origination fee (usually 1% of the loan) or points (also 1% of the loan, per point) to lower the interest rate but with today’s low interest rates, it is often not as appealing to do so. Typical lender fees include an underwriting fee, tax service fee and application fee, although there may be others. Excluding any origination fees or points, these charges can cost anywhere from about four to six hundred dollars, which is typical, to well over a thousand. Don’t be afraid to ask questions about these fees before you agree to the loan. After you have made application, your loan officer will provide you with a good faith estimate of your closing costs.
VA Funding fee – for buyers who qualify for and choose to get a VA loan, a funding fee applies, which can be rolled into the loan. VA buyers can borrow 100% of the property value and roll the funding fee into the loan, or pay the fee at closing. The norm is 2.2% of the loan for first time users, 3.3% thereafter. Discounts on these fees may apply for some veterans.
Survey – This is nearly always required if there is a loan and is a good idea to do anyway. A current survey will show any easements or encroachments on the property you are buying, such as neighboring fences, drainage easements, utility easements, etc. It will also reveal if the property you are purchasing has encroachments to setback lines, has a fence on the neighbor’s land or something similar. Typical surveys for lot and block subdivisions cost between $350-450, although large, complex or waterfront properties are usually considerably more.
Appraisal - This is required by the lender to determine that the money they are lending is being used for a property that is worth what the buyer is paying for it. An appraisal usually costs at least $400. Large or complex properties are often higher.
Recording fees - Recording a deed costs about $25. Recording a mortgage can be $275 or more.
Pest Inspection – This is for Wood Destroying Organisms (called a WDO inspection) and must be done within 30 days of closing a sale on a home. It includes searching for wood rot and fungal decay in addition to termites. If dry rot or fungal decay is found (common in Florida), the wood must be replaced with clean wood in the areas of decay, and a re-inspection done. If found, live termites must be exterminated and a re-inspection done. Many homeowners carry a transferable termite bond protection plan. A WDO inspection can usually be done for around $55, including one re-inspection, although it is occasionally higher.
Septic System Inspection - This is actually a drainfield inspection and may be required for all homes over 5 years old that use septic tanks for waste water disposal. It costs about $200. If the tank must be pumped, there is an additional charge, but this is not common on homes less than 10 years old. This inspection is necessary “if” the lender requires it.
Home Inspection - This is paid for by the buyer. It allows the buyer to have a qualified home inspector thoroughly check all aspects of a home he or she has contracted to purchase, and often reveals problems requiring attention that may not have been apparent. I highly recommend home inspections, particularly for resale homes. Inspections on small homes usually start at around $250 and go up from there.
Credit report – About $50 or $60, this fee is paid for by the buyer at the time of loan application.
Overnight delivery charges - These are fees charged by a title company to send out closing packages overnight for parties who cannot appear in person for closing or to overnight a loan pay-off resulting from a closing. Closing documents are dated and time is of the essence. Loan interest, property tax pro-rations and homeowner association dues pro-rations are based on the closing date. Overnight delivery charges are usually paid for by the party served by them, and can cost as little as $40 to more than $100. $60-80 is common, but packages sent out of the country are usually higher.
Escrow Items – These are sums of money held in an escrow account by a lender to pay for property taxes and insurance in the event a borrower is late on payments or defaults on the loan. These costs belong to the buyer, as does pre-paid interest. Pre-paid interest is the amount of money charged per day from the time of closing until the beginning of the first full payment period. Although pre-paid interest is paid in advance, regularly monthly payments pay interest in arrears, so a closing on July 15 would charge the borrower 17 days of interest at closing, with the first full payment due September 1.
If you have any questions, please be sure to give me a call or feel free to ask your lender what costs you should expect.