Closing costs encompass the various fees for the services and expenses required to finalize a mortgage. They typically amount to 2% to 5% of the loan principal. You will have these costs whether you buy a home or refinance. Although most closing costs fall on the buyer, the seller has to pay a few as well such as the real estate agent’s commission.
Closing Cost Breakdown
Knowing and understanding how closing costs work and what they cover will help you budget accordingly to ensure a smooth transaction in the final stages of buying a home.
Buying a home is more than just paying a down payment and getting mortgage approval.
Realtor Estelia Mesimer advises buyers of the importance of knowing and understanding closing costs to avoid last minute surprises at the time of closing the deal.
Here is a list of some of the typical fees associated with the purchase of a home.
The appraisal fee pays for a licensed professional to determine what the home is worth before a lender will extend a mortgage offer. Estimating the market value of a single-family home will typically range from $300 to $450 and more for a larger home.
Home inspection fee
Before a bank lends you hundreds of thousands of dollars, the bank wants to know that the house is structurally sound and safe to live in. The results of a home inspection can give the buyer some leverage to negotiate the sale price. If severe problems are discovered, you might have the option to back out of your contract if you cannot come to an agreement with the seller on how to fix those issues. Home inspections cost approximately $300 to $500.
Credit report fee
A credit report fee is what the lender charges to check your credit score and obtain a credit report. The fee is $25 or more per individual borrower on the loan.
Mortgage origination fee
Lenders sometimes charge a fee for initiating the loan. It can range up to about $125.
Loan application fee
Some lenders charge a fee of several hundred dollars to process the application.
If you are buying other than a new property, lenders will send someone to search local property records for the title of the home to make sure there are no issues with ownership or liens. The fee is around $450.
Lenders require obtaining title insurance in case there are issues with ownership after the sale. This protects the lender and the cost is usually 0.50 percent to 1 percent of the loan amount. The homeowner may wish to purchase title insurance to protect their financial interest in the property at an additional cost.
Some homes have an assumable mortgage. This means that the loan can be transferred from the current owner to the subsequent one. The interest rate and terms stay the same on an assumable mortgage. If you are assuming a mortgage, you can expect to pay a variable assumption fee based on the balance of the loan.
Interest accrues on mortgage loans between the settlement date and the due date of your first monthly payment. Lenders typically require the buyer to pay the interest accrued during this time. The cost of prepaid interest fees will depend on the size of your loan.
It is common for buyers to pay two months’ worth of property taxes at the closing. These cover both city and county taxes. The amount of tax paid depends on the value of the property, your income, household status, and local government rates.
Homeowner’s insurance premium
Most lenders will require the buyer to purchase a home insurance policy before the settlement is finalized. This keeps you protected in case of damage, vandalism, burglary and more. If the property has an HOA fee, the association might include insurance premiums in the monthly dues. So if you’re buying a condo or other property with an HOA, be prepared to pay those dues upfront as well.
Real estate commission
Real estate commission fees are split between the buyer’s agent and the listing agent. Commissions can range from 5% to 8% of the sale price, but 6% is the industry standard.
The commission fees are almost always paid by the seller, unless otherwise negotiated.
Title transfer fees
This fee is commonly paid by the seller and legally transfers the seller’s property rights to the buyer. Title transfer fees vary by region, but it is usually a fixed amount per every $1,000 of the sales price, such as $5 or $7.50.
St. Petersburg’s property tax rate to remain the same in 2020
In July 2019, the St. Petersburg City Council unanimously voted to set the rate at no higher than $6.76 in tax per $1,000 of assessed, taxable value for 2020. That rate is the same as this year, and has remained unchanged since 2017. A homeowner with a house assessed at $250,000 with $50,000 in homestead exemptions would pay $1,352 in city taxes.
Bottom Line: There are serious costs and fees that come with the purchase of a house and can cost an extra 2% to 5% of the home purchase price. For answers to all your real estate questions, call The Mesimer Team today!
Closing a Florida Residential Real Estate Transaction
Closing on Florida Real Estate: Buyer’s Documents at Closing
7 Step Guide to Buying Property in Florida, by Lisa and Lee Mirman
St. Petersburg Communities
Greater Pinellas Point
Historic Old Northeast
Historic Roser Park
Isla del Sol
If you’re interested in any of these of communities or live in one and are thinking of selling, talk to The Mesimer Team.