Florida Home Loan Closing Costs
Usually mortgages are confusing to people because it's not a field they follow closely, nor something they "buy" on a more regular basis - like a car. Below you'll find some terms that you've probably heard before and also some explanations about closing costs fees you may be paying when you take out a Florida home loan on your new home purchase. By no means is this information complete, but it addresses the most common questions that our borrowers have asked over the years. We hope you find it helpful.
Loan Origination Fee
This covers the administrative expenses in setting-up and processing the home loan. The loan origination fee may be a percentage of the mortgage amount. Not all lenders charge this fee so be sure to inquire about it. If a lender does charge this fee then you should not see a loan processing, closing doc prep, or tax service fee on your Good Faith Estimate.
An option for the home buyer is to pay points to lower the interest rate at which the loan will be repaid. Each point equals 1.00% of the mortgage amount. For example: on a $150,000 loan, 1.00 point would equal $1,500. Compare the interest rate with 1 point versus an interest rate and no points and check if there is a major difference in the monthly payment before you pay the points. For more information, see our locking in interest rates page.
The fee for having the house appraised may be incorporated into the closing costs or payment may be required by the lender at the time the loan application is submitted. Many times a lender will charge an application fee that will be applied to the cost of the appraisal, be sure to inquire if this cost is to be applied to any of your closing costs charged by the lender.
Credit Report Fee
The lender uses a credit report to help determine the creditworthiness of the loan applicant. This fee is often paid when you apply for the loan as the credit report is an important first step in the loan qualification process.
Odd Days of Interest Payment
Typically the buyer is required to pay interest on the mortgage loan to cover the time between the closing date and the end of the month. For example: if the closing is on May 15 then you will be charged interest from May 15th to May 31st. However, your first mortgage payment will be due July 1st, not June 1. Under Federal law all interest on a home loan must be paid in arrears. That means when you pay the July 1st payment you are actually paying the June interest in arrears. "All" mortgage home loan payments are due on the first of the month and typically are late after the 15th.
At closing, if you are paying your real estate taxes and insurance in your monthly payment, an escrow account will be set up to pay these items at their future due date. Most state laws require the actual amount collected be enough to pay the full annual amount on the actual due date, plus two months as a "cushion." These monies are not charged interest nor do they earn interest. They are simply added to your payment in order for the lender to pay the amounts when they come due.
Real Estate Tax Closing Costs
This is the one closing cost that is prorated between the buyer and seller. If the seller has already paid the annual property taxes, the buyer typically reimburses the seller for the period in which the buyer will be occupying the property. Likewise, if the taxes have not yet been paid, the seller typically reimburses the buyer for the period in which the buyer occupies the property. For example, if taxes for the year you purchase are due December 31st and you close on June 30th, then the seller's closing statement will show a credit to the buyer for real estate taxes from January 1st through June 29th - the days the seller actually occupied the property.
State Required Fees - Varies by State
Documentary Stamps on Deeds, State
Tax required on all deeds or other documents used as conveyances. The current calculation is $0.70 per $100 of purchase price in Florida.
Mortgage Documentary Stamp Tax on Notes, State
Tax required on all new and assumed mortgage notes. This calculation is $0.35 per $100 of face value of the mortgage in Florida.
Intangible Tax on Mortgage, State
This is an additional Florida tax required prior to a mortgage being recorded. The cost is based on the face value of the mortgage and is currently at 0.002% of the mortgage amount in Florida.
Insurance Closing Costs
This insurance covers replacement costs for damages caused by fire, wind or other disaster that might affect the value of the property. Typically, the insurance also includes personal liability and theft coverage. Additionally, you will be required to pay one full year of coverage at closing.
Flood Insurance - If Required
Additional hazard insurance coverage that is required for homes located in a designated hazard zone as established by the Federal Emergency Management Agency (FEMA).
Private Mortgage Insurance - PMI - If Required
Insurance required for conventional mortgage loans when the borrower's down payment on the house is less than 20% of the loan value. It is typically calculated in 5.00% increments, e.g., 95% loan to value; 90% loan to value.
This insurance policy protects both the buyer and lender by insuring a clear chain of title. It insures that that the person who sells the house has the legal right to do so.
Transfer Taxes and Recording Fees
This is the cost for transferring ownership of the property and recording the purchase documents with the county.
Title Closing Fee
This is the cost for the title company conducting the escrow closing.
Page Authored by Benjamin Dona of Gulf Coast Associates, Realtors
If you have additional questions or would like to get started on your search for real estate in Southwest Florida and have questions about your closing costs, please don’t hesitate to contact us.