If you are in the market for a new home, you will quickly discover seemingly endless amounts of charges you will pay during the process. Some of the most costly will be part of the closing process. To better understand what you are in for when purchasing a new home, we’ve provided the top 5 costs you can expect to pay when closing on your new house.
What are Closing Costs?
Before we dig into the fees, it’s important to understand what exactly closing costs are in the first place. Typically, these are the expenses related to the process, like title search costs, appraisals, homeowners insurance premiums, property taxes, and more. All of these services are necessary to and get lumped under this category.
When these get paid can also happen at different times and rarely occur in one lump sum. For example, you will have to pay someone to come out and conduct a home inspection long before you ever sit down to finalize your loan paperwork. It’s possible you might be able to convince the seller to incorporate some of these expenses into your loan, but be prepared to pay them as needed. What are the top 5 closing costs?
1. Lender Fees
Lenders have a fee for everything, and it seems that there is no exception for home closings. Some charges you can expect to pay, include:
- Credit report
- Application costs
- Processing fees
- Origination charges
- Discount points for a lower interest rate
- Appraisal costs
- Wire transfers
- Termite inspections
2. Escrow and Prepaids
The lender wants to ensure that your property’s insurance and tax liability don’t experience a gap between the time you begin paying on your new home and the owner stops. So, you can expect to pay these before your regular mortgage payments begin. These are known as prepaids and may also include prepaying interest that would accrue from the time you close until you make your first installment.
Many home buyers opt to include the cost of their homeowner’s insurance and property taxes into their payments. This creates an escrow account that your loan servicer can draw from to pay these costs for you going forward, but you will need to add funds to cover expenses that need payment right after closing.
3. Titling Fees
These fees are part of several stages in the closing process. First, you can expect to pay for a title search that will look for any hidden liens or deed defects attached to the property. Title insurance charges will also have to be paid, and the costs of recording your ownership with your county. If you decide to hire a title attorney to help with the closing process, you can also expect to pay legal fees for these services.
4. Mortgage Insurance
It’s not uncommon for a home loan to require mortgage insurance. Federally-backed loans often need this type of coverage in case the borrower should go into foreclosure. This is a frequent requirement for small down payment loans because of the increased risk to the lender. You can expect the entire cost of this insurance to be paid in full upfront, but it’s usually added to the amount you are borrowing. However, it will be a separately listed expense on your closing paperwork.
5. Property Fees
Fees related to the property itself can also get lumped into the closing costs category. For example, you can expect to pay for a survey to confirm your new home’s property boundaries. Also, an evaluation will need to be conducted for flood risk and whether you’ll need insurance coverage for that or not. There could even be seemingly unrelated costs like a courier charge or warranty fee, but every expense will get itemized.
Trust a Title Company for Your Florida Home Closing
For more details about closing costs for buyers, All Florida Title Company is here to help. At All Florida Title, our team is here to assist you throughout the entire home buying process. Our services provide meticulous attention to detail, and owner Attorney Marc Brown personally reviews every client file. Trust us to help you navigate the complexities of closing on your new home while ensuring your costs get minimized as much as possible.
At All Florida Title, we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 954-566-2200.