Purchasing real estate in Florida involves various costs beyond the purchase price, and understanding these closing expenses is crucial for buyers. Here’s an in-depth look at the typical closing costs involved in buying a property in the Sunshine State:
Lender’s Title Insurance
When obtaining financing, buyers are required to pay for a lender’s title insurance policy, which safeguards the lender’s mortgage lien on the property. The cost of this insurance is determined based on the purchase price and loan amount.
Lender-Related Fees
Buyers acquiring a mortgage will encounter several fees associated with the lending process. These may include charges for a credit report, appraisal, application, loan origination, and underwriting. It’s important to factor in these expenses when budgeting for the purchase.
Closing Fee
A crucial component of the closing process is the closing fee, paid to the title company overseeing the transaction. This fee covers various services, including escrow deposit management, lien and title searches, and facilitation of the closing itself. While closing fees typically do not exceed $1000, they are an essential part of the overall closing costs.
Survey Costs
Property surveys are essential for confirming boundary lines, identifying encroachments, and ensuring legal compliance. Although cash buyers are not mandated to obtain a survey, it’s advisable to do so to mitigate potential boundary disputes and legal issues down the line. Standard survey costs generally range from $350 to $500.
Title Search Costs
Before finalizing the transaction, buyers must conduct a thorough title search to identify any defects or issues that may affect the property’s title. This process typically incurs fees of around $200 and is essential for ensuring a clean title transfer.
Recording Fees & Mortgage Taxes
Buyers are responsible for covering recording fees for both the mortgage and the deed. Additionally, the State of Florida imposes mortgage taxes, including a documentary stamp tax and an intangible tax, based on the loan amount. These taxes are important considerations when estimating closing costs and can vary depending on the property’s location and value.
Owner’s Title Insurance Policy
While not mandatory for cash buyers, purchasing an owner’s title insurance policy is highly recommended. This one-time premium provides invaluable protection against undiscovered title issues, such as forged deeds or undisclosed liens, and can save buyers from costly legal battles in the future.
Understanding and budgeting for these closing costs is essential for buyers navigating the real estate market in Florida. By working with a reputable title company and seeking guidance from experienced professionals, buyers can ensure a smooth and financially sound closing process.
Let’s do some math
In 2021, the average closing costs for buying a home in Florida were $8,554. For comparison, the national average was $6,905.
The median sale price for a Florida home was $399,900 in the first quarter of 2023.
Suppose a buyer borrowed $319,900 to buy a home at that price (the purchase price minus a 20% down payment). The closing costs would be an estimated $6,398 to $19,194.
It’s often much less than what sellers owe at closing. Sellers typically cover the bulk of closing costs.
Buyer Average Closing Costs
Buyers’ closing costs will typically be between 2-5% of the home purchase price. The amount will vary largely on whether the property is being purchased with cash or with a lender.
Cash transactions end up with much lower closing costs.
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