When purchasing a home in the South Florida, Port St. Lucie, Palm City, Stuart, Jupiter and Palm Beach real estate markets there are fees, costs and expenses which get allocated between the buyer and the seller on the closing agreement. Closing costs are a point of negotiation between the buyer and the seller to negotiate which party is going to pay what. It is important that mortgage borrowers understand what the costs involved in obtaining a mortgage really are and what they mean so the components of closing costs are listed below with detailed descriptions of where and who your money is going to.
Closing costs are broke down into 2 categories:
COSTS TO BE PAID BY THE SELLER
Documentary Stamps (Doc Stamps) on the Deed:
Collected at a rate of .70 cents per $100 or 0.7% of the sale of a home….these fees are assessed at the time of recording your transfer or deed
Title Search Charges:
A title search is to assure you and your lender that the seller is the legal owner of the property that you are buying and that there are no outstanding claims or liens against it. The title search may be performed by a lawyer, an escrow or Title Company, or other specialist prior to closing
Any record that can affect ownership rights must be examined before closing. These records can be spread among several local government offices, including surveyors, county courts, tax assessors, and recorders of deeds and include liens, records of death, divorces, court judgments and contests over wills.
It is strongly recommended that you obtain Title Insurance, or an Owner’s Policy to protect you from any hidden title problems. Sometimes title problems occur that could not be found in public records or are inadvertently missed in the title search process.
Title Insurance protects the lender against any errors in the results of the title search. If an issue arises, the Title Insurance covers the lenders investment in your mortgage.
Also known as a sales commission, this fee is agreed upon between the seller and the sales associate representing the brokerage at the time the property is listed
COSTS TO BE PAID BY THE BUYER
Documentary Stamps (Doc Stamps) on the Mortgage:
Collected at a rate of .35 cents per $100 or 0.35% based on the amount of money borrowed, this is a Florida tax on new and assumed mortgages
Intangible Tax on the Mortgage:
Collected at a rate of .20 cents per $100, this is a tax charged on all new loans
Fees that the lender charges to process, approve and make the mortgage loan. Typical lender fees include an underwriting fee, tax service fee and application fee. These fees vary depending on the lender. Some lenders offer a lower interest rate but charge more upfront fees at closing
Mortgage lenders generally require a property survey before they will loan money for a mortgage, and many title insurers require this as well. A property survey is a sketch or a map of the property showing its boundaries and other physical features. Even if a survey has been done in the past, lenders typically require a recent survey, generally done within six months of the closing date. An up to date property survey will reflect any recent changes to the property, such as the addition of a fence or driveway.
Typical surveys for lot and block subdivisions cost anywhere between $375-450, although large, complex or waterfront properties can usually cost more.
A property appraisal is an evaluation of a property to assess its market value. Banks and mortgage companies will give a homeowner a loan based on the appraisal value of the property they want to buy.
Appraisers are licensed by the state and are an independent third party who does not have any financial stakes in the transaction apart from his fee for doing the appraisal. An appraisal usually costs about $400 but large or complex properties can sometimes cost more.
Recording a deed costs about $25, whereas recording fees on mortgages can cost up to $275 or more
A pest inspection must be done within 30 days of closing a sale on a home. This is an inspection for Wood Destroying Organisms (called a WDO inspection) and includes searching for wood rot and fungal decay in addition to termites. If dry rot or fungal decay is found the wood must be replaced with clean wood in the areas of decay, and a re-inspection must be completed. A WDO inspection can usually be done for around $100
Septic System Inspection:
This inspection is required for all homes over 5 years old that use septic tanks for waste water disposal. The cost is around $200 and if the tank needs to be pumped there will be an additional charge. This is usually not common on homes less than 10 years old
A home inspection allows the buyer to have a qualified home inspector thoroughly check all aspects of the home that he or she has contracted to purchase. The home inspection often reveals problems requiring attention that may have not been apparent. Home inspections are highly recommended, especially for resale homes. The cost for an inspection on a small home usually starts around $250 and can go up from there
This fee is paid by the buyer at the time of the loan application and is about $50-60
In the event of a borrower being late on payments or defaults from the loan, there is a sum of money held in an escrow account by a lender to pay for property taxes and insurance. 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. For example a closing on July 15 would charge the borrower 17 days of interest at closing, with the first full payment due September 1.
Please note: Not all mortgage lenders charge all of these fees on every loan and some mortgage lenders charge other fees not listed here. Therefore, you should contact your mortgage lender for more specific details on the fees that they charge for your particular loan