What Closings Costs Does A Home Buyer Have To Pay In Florida?
The closings costs you pay as a buyer will ultimately be determined by the type of property you buy, the costs of the property, whether or not you are buying cash or obtaining a loan, and several other factors.
If you are applying for a loan in Florida, it’s best to request from your lender a form called the “Loan Estimate” formerly know as a “Good Faith Estimate” which will outline estimated closings costs. They can also go over any concerns you may have as most lenders will usually overestimate to play it safe.
As you get closer to your closing, the title company will prepare a settlement statement for you to review outlining costs (debits/credits) to both the buying and selling parties as well as a “due from borrower” amount needed from the buyer in order to fund the closing.
Let’s break down some of the fees you could be responsible for as a buyer in the state of Florida.
1. Home Inspection – Usually considered an out of pocket costs (something you will pay before closing), most buyers will get home inspections of their property. General inspections can range anywhere from $350-$600, and you may be required to obtain a 4 point inspection which is another service that may be needed by your future home owners insurer. Other inspection fees could also include wind mitigation, WDO (wood destroying organism) inspection, and any other specialists that you may choose to hire to view the property.
2. Appraisal – You will likely have to obtain an appraisal in order to secure financing. This could be a costs you may have to pay up front, or it may be due at closing depending on your lender. Appraisals can vary widely and most of the ones we’ve seen range from $400-$600.
3. Survey – Not all lenders will require you to get a survey (check with your lender first). However, if you choose to get one it is essentially a map that shows the boundaries and easements of your property and they usually range from $250-$350 depending on the size of the property.
4. Loan – If you finance a property, you will see this on your closing statement. Although you will usually have terms to pay off the loan – 10, 15, 20, 30 years… it is still considered a debt you will have to pay over that period of time with interest charges.
5. Taxes – Although you may receive a credit for county and property taxes from the seller for the time of the year they owned the home, you may still be responsible for non-ad valorem taxes. Non-Ad Valorem taxes are assessments based upon improvements or service costs such as lighting, paving assessments, solid waste, etc.
These are not related to property value. ***Fun fact, the word Ad Valorem is latin for “according to value”***
6. Loan Charges – You may incur charges to process your loan including processing fees, underwriting fees, and pre-paid interest.
7. Credit Monitoring – Your lender may charge a Credit Report Fee or make you pay for some type of service that had monitored your credit as you went through underwriting.
8. Mortgage Insurance – Some loans may or may not require mortgage insurance depending on the type of loan, the down-payment percentage, and other factors. One thing to be wary of is mortgage insurance doesn’t just apply to your monthly payments, you may have to pay a large fee as part of your closings costs to the entity that’s providing it such as HUD or other private providers.
9. Home Owners Insurance – As long as you finance a property, you will be required to carry home owners insurance and often times have to pay for a year up front.
10. Title Charges And Settlement Charges – When you using a title company you will likely see several line items that are related to your closings cost for using that company’s services.
11. Lenders Title Insurance And Owners Title Insurance – As with many things in life, insurance is often required. In your case, you will likely have to pay the lender’s title insurance and for your own title insurance. Depending on the realtor you choose to work with, they can often negotiate and get the seller to cover the owner’s title insurance to alleviate your costs.
12. Government Recording & Transfer Charges – The government wants to make sure they get paid in any form possible for you getting a piece of property. You will often have to pay recording fees as well as intangible tax and mortgage state tax fees as well.
13. The Most Important Thing To Know – It’s a common misconception that a buyer has to pay their realtor a fee in order to get representation. The vast majority of time, a buyer will pay nothing to their realtor as the realtor is compensated by the commission offer by the listing agent.
The 727 Team takes our job very seriously and we protect our clients! Don’t make the mistake of going in unrepresented by a great real estate team… we can help you at no additional costs to you and guide you through the entire process.
How Much Does It Costs Me To Hire A Realtor?
We can’t speak for all other agents, but when you choose to work with The 727 Real Estate Team it costs you nothing. The sellers offer a commission to the buyers agent for bringing a buyer.
There may be a few exceptions to this like certain For Sale By Owners, but we will be happy to approach our options if that were to pop up.
We feel that people that don’t use a realtor or real estate team to represent them may be making a grave mistake. We are experienced in the industry and have the knowledge and skills to guide you through the process, negotiate on your behalf, and ultimately save you money and a lot of headaches.
Should I Speak With A Lender Or Bank Before Looking At Homes?
Absolutely! Buying a home is a huge undertaking with many parties involved. The last thing you want to do is start the race on the wrong footing. Here’s another way to think about this… if you start searching for homes without a pre-approval, you could end up losing out on the house of your dreams because you can’t get obtain a pre-approval in enough time to get a valid offer in or meet a deadline.
Another thing to consider is whether or not you qualify, or if you are searching too low or too high. You won’t truly know unless you speak with a lender and give them the time to educate you on the different options you may have.
Should I Do A Rent-To-Own Property or Lease Option?
Rent-To-Own is a term that is used a lot, but the official terminology used is known as a Lease Option. In a lease option, the tenant leases (rents) the property from the owner with the right to buy. Traditionally in lease-options the tenant is under no obligation to buy, but the seller is obligated to sell subject to the terms and conditions of the contract.
As great as this concept sounds in theory, there are often several caveats that make it less desirable. Owners will usually require a large down-payment and typically only a portion of the monthly rent is credited towards the purchase of the property if the buyer decides to act. Finding properties that offer a lease option is like looking for a needle in a haystack. They’re out there, but you are limiting yourself to a very tiny percentage of the properties available for purchase.
This would be the equivalent of going to a car lot with thousands of cars, but limiting yourself to a choice of 5 or 6 cars because they give you the freedom to walk away, leaving you with nothing and a hole in your pocket.
If you’d like to discuss more on what may be holding you back from buying, reach out to us and let’s meet for coffee (no strings attached).
Are Residential And 4 Point Inspections Separate Things That Both Need To Be Done?
A residential home inspection is a comprehensive report that will go into many details on what an inspector finds during your home inspection. They are highly recommended but usually optional depending on your lender’s requirements if you are financing.
***We highly recommend getting one of these as they can help protect you from purchasing something that has issues you didn’t see, or it gives you room for negotiations***
The 4 Point Inspection is used for insurance purposes. Also depending on the age of the home and lender/insurance requirements, you may or may not be required to get this. The 4 point inspection is a simplified report that focuses on: The Roof, HVAC, Plumbing, and Electrical. Using home owners insurance guidelines, the inspector will note if something is an issue that could make a home uninsurable.
How Long Does The Seller Have To Respond To My Offer?
When we write up an offer for you, we are able to put a deadline for the seller to accept. During that time-frame before, if you as the buyer choose to do so, you can also rescind your offer.
If the timeframe elapses, the offer is considered legally void unless both parties come to an agreement.
What Is The MLS?
The MLS is an acronym for The Multiple Listing Service. There are 100s of multiple listing services across the country, and long before sites like Zillow and Trulia, they were used exclusively between real estate brokers to share properties for sale. The MLS we use is known as the Florida Regional Multiple Listing Service.
In today’s world there are 1000’s of sites that pull their data from the Multiple Listing Service. Many of these sites get complaints from users claiming they show homes for sale that are no longer available.
This has also been our experience and we always encourage our clients to allow us to set you up on an MLS search so there’s no delayed data and you are getting the information first.
Who Pays The Realtors Commissions?
The realtors commissions are typically paid by the seller. The seller will hire a realtor who will then offer a commission to a buyers agent for bringing a buyer. There can be exceptions to this but it’s better to discuss with your realtor as their policies and terms could be different.
How Much Should I Offer On A Home?
This is truly the magic question, and this is where proper research and negotiation is so vital. We’re going to tell you how it is, whether a house is under-priced, over-priced or fair value. When we represent you, we will be happy to advise you of a price or price range backed by data and our expertise on the local market.
We do comparable research for similar homes in the neighborhood and area and we also take into consideration many factors including:
How many days the home is on the market?
What’s the condition and presentation?
Where is it located?
Who is the listing agent and how is it being marketed?
Any details we can pick up on who the seller is and their motivation to use this to your advantage.
And much more!
What Are Typical Contract Contingencies?
A standard real estate contract in the state of Florida has pages of contingencies, not including any addenda that may be filled out and attached with the contract. So let’s start out with the basics… what is a contingency and more specifically how does it apply to a real estate contract?
Because there are multiple elements going on in any real estate contract, contingencies are provisions in contracts for unforeseen events and circumstances that can protect buyers and sellers in the event parties fail to meet their obligations.
There are many we could go over, but for the sake of this question, we’ll cover 3 very important ones.
The Inspection Contingency is a contingency that may allow a buyer a period of time to perform inspections and outlines their rights for requests, repairs, and cancellation of the contract.
The Appraisal Contingency is usually an addendum assigned to a contract that outlines what the parties agree to in the event a property does not appraise.
The Financing Contingency is a contingency that outlines the actions that must be taken when financing a home as well as in the event of financing falling through what the parties agree to.
Should I Buy In Pinellas County Or Continue To Rent?
Whether you are looking in Pinellas County or the surrounding Tampa Bay Area, this is a question that has probably crossed your mind. You may be surprised to hear a couple of real estate agents say buying isn’t for everyone.
That’s right… we said it, our business model is built on transparency, but allow us to explain how to determine whether now is the right time.
Here’s a list of things to consider and our recommendations:
1. Not sure if you will be living in this area for a few years and you’re not interested in investments – You’re better off renting… if you sell quickly after you buy, by the time you factor in all the costs you may owe more on your mortgage than you net from the sale.
2. Love the Florida lifestyle and recognize the boom that is bringing more young professionals and families down here – You’re better off buying… land is very limited here, and as the population grows, the supply is not meeting the demand which is great news for property owners that are looking for better than average appreciation.
3. Not ready for the responsibilities for home ownership – You’re better off renting… home ownership takes work and you also have to be prepared for unexpected expenses. If you are still interesting in buying with minimal responsibilities you may be better off purchasing a condo or town home that has a home owners association that takes care of some of those responsibilities.
4. Are you worried about things getting more expensive in the future – You’re better off buying… although no one can predict the future, we can look to the past as a good indicator. Interest rates are at historic lows! Even a fraction of a percent difference in an interest rate could mean thousands of dollars saved over the course of a 30 year mortgage. On top of that, prices have steadily been increasing, the population is growing, and there’s very little land to build on which is likely only to get even more competitive.
5. Like paying less money for more space and the idea of building equity – You’re better off buying… as in most scenarios your mortgage will often be cheaper for an equivalent amount of space compared to your rent. Even though at the beginning of your mortgage a lot will be going towards interest, you are still paying down the debt and building equity in a property that appreciates. Another great advantage is if you are locked in a rate, the principal of your mortgage won’t go up unlike rents which typically increase every year.
6. Love the idea of customizing a property – You’re better off buying… especially if you purchase a single family home, you’ll be able to decorate and renovate to your heart’s content. There may be some exceptions with state and county laws and any neighborhood associations restrictions, but these are often small in comparison to the amount of things you are allowed to do.
7. Feel like you don’t have enough money to buy… You’re better off buying… this answer may surprise you, but often times if you have a discussion with a good lender, they can either get you in a home for less than you think, or they can devise a plan of action for you to take to get yourself in the position to be able to buy. Why not reach out when the help is completely free?
What Is PMI?
When you are financing a property and you make a downpayment that is less than 20 percent, you may be subject to PMI. PMI is an acronym for private mortgage insurance, also called MIP – mortgage insurance premium on FHA loans.
The concept is the same, it is a type of insurance that protects the lender just in case the buyer defaults on their loan.
Most mortgage insurance premiums are worked into the mortgage payment and depending on the type of the loan, can either be for the life of it or until the borrower can show they have 20% equity in the home.
It’s always best to reach out to a lender whether financing or deciding to refinance to inquire into what options may be available to help lower your monthly costs or help you pay off your home sooner.
What First-Time Home Buyers Programs Are Available In Pinellas County?
The most popular program for a period of time was the Florida Bond Program. However, many of the first-time buyer programs run on budgets or special conditions so we advise to check in with a local lender for the latest information.
Here are some things you may want to consider when opting in for a first-time home buyer program:
It it income restricted?
Is it limited to certain types of properties or areas?
Will it effect my interest rate?
Does it make more economic sense in the short or long run, or will I end up paying more at the end of the loan?
Do I have to pay back any credits, and if so… what are the conditions?
Is there any occupancy requirements and how many years must I remain in a home to honor the program requirements?
What Is An Earnest Money Deposit?
The earnest money deposit or escrow deposit is a line item on Florida real estate contracts where the buyer can elect to put in their offer how much money they will allow to be held in escrow.
This money is a show of good-faith and a way for a buyer to show a seller they are seri0us about the contract. The caveat with escrow deposits is depending on the terms of the contract, the buyer can be subject to lost all or part of that deposit to the seller if they don’t execute their end of the agreement. It’s always important to understand the legal language of the contract first, and if not, seek legal advice.
What Does My Mortgage Cover?
A typical mortgage payment is usually composed of 4 elements: Principal, Interest, Taxes, and Insurance.
However, the exact elements of your mortgage payment will depend on what type of home you’re financing, the loan you have, if you are part of any special buyer programs, and the conditions you agreed to on the loan application.
When you’re starting your search to buy a home in Pinellas County or the Tampa Bay Area, the questions listed above should prove to be resourceful to you (click on them to drop down the answer).
If you have any other questions regarding the home buying process, please don’t hesitate to reach out and we will be happy to provide you with the answers you are looking for!