What are Closing Costs?
Closing costs are the costs associated with purchasing a property. The title company in charge of the transaction is the one that includes on the HUD-1 Settlement Statement all the closing costs that the buyer and seller incur when purchasing a property.
How do I calculate my closing costs?
If the transaction is in cash, closing costs are approximately between 1.5% to 3% of the purchase value and if it is financed it can vary between 4% and 5%, this will depend on the bank’s cost when generating the mortgage. When purchasing directly from the developer, closing costs can represent 6% to 8% of the purchase value.
The most common closing costs are:
Loan application fee : Most banks or financial institutions charge an initiation fee, also known as an application fee. The lender may also charge you discount points to lower your interest rate to improve the conditions of the mortgage loan.
Property appraisal fee : This report is ordered by the lender or bank to ensure the condition of the property and verify that the purchase price is in line with the most recent sales of similar properties in the same area. The price of this fee generally does not exceed $900 on residential properties.
Costs that the lender requests to be paid in advance : These charges are mortgage interest in advance of the month you will live in, prepayment of the property insurance policy, generally requiring 12 months in advance.
Reserve deposits : The bank usually requires the buyer to deposit in an escrow-type account managed and administered by the same financial institution granting the mortgage. These reserve deposits apply to: property insurance, local property taxes. This year’s property taxes are prorated as of the closing date between a seller and buyer, each paying for the days they occupy the property.
Charge for surveying, drawing of plans or recognition (Property Survey of the property): When a single-family home is purchased, such as a house with land, the borrower or bank requires a survey or survey report to ensure that there are no violations or illicit acquisition by a neighbor of portions of the property’s land or defects related to the title of the property. Approximate cost $250 to $450.
Title insurance: It is used in every transaction and basically studies the history of property transfers to verify that they have been done correctly. The state of Florida by law provides a minimum charge for title insurance policies, an amount called “the enacted minimum rate.” This rate is $575 per $100,000 of property value less than one million dollars. The rate decreases on a sliding scale for properties valued at more than $1 million.
Cost of the attorney or title company : The buyer has every right to hire a real estate attorney or title company to defend his or her interests at the time of the transfer of the property or during the purchase process. This cost ranges from $800 to $1,000.
Property registration costs : Deed of sale $6.00 for the first page $4.50 for each additional page. Mortgage record $6.00 first page $4.50 each additional page. In Florida the documentary stamp tax and the intangible tax. These are the taxes that the state of Florida charges for the privilege of borrowing money. The documentary stamp tax on mortgages is 35 cents per $100.00 of the mortgage amount and the intangible tax on promissory notes is an amount equal to the face value of the note multiplied by 0.002 ($2 USD per thousand approximately). These costs are paid by the buyer. Documentary stamp tax in Miami Dade County is calculated at $.70 cents per $100 of the purchase price. For example, if the purchase value is $200,000 this amount is divided by 100 and then multiplied by 70. This tax is generally paid by the property owner at closing.
Property inspection : It is recommended that the buyer carry out an inspection of the property, which includes inspection of termites or destructive organisms, roof inspection, electrical, plumbing, etc. The cost is estimated between $250 to $900.
Application to the condominium or association of co-owners : This fee is paid when the buyer requests all documentation directly from the condominium administration. The cost varies depending on the property and whether you wish to purchase private memberships in case they are required by the community. On the day of closing, a proration is made of the monthly payment paid to the condominium, taken from the first day of the current month until the day the closing is made.
Estoppel letter : It is a letter that is requested when there are condominium associations where it shows the account statement of the property owner and allows us to see if there are payments of extraordinary fees (Special Assessments) for community improvements. This letter is usually paid for by the seller.
Sales Commission or Real Estate Agent : The real estate or real estate agents involved in the transaction are usually compensated by the seller of the property. In Miami-Dade County, a 6% to 10% sales commission is paid, based on the sales price. In some exclusive representation circumstances the real estate agent also charges the buyer a representation fee, which may be based on a percentage or a fixed cost, which is agreed upon between the buyer and his or her real estate agent in advance.