There aren’t many things better than the feeling you get from buying a new home – especially if you’re a first-time homebuyer. But that overwhelming feeling of joy quickly turns to frustration for a lot of future homeowners the moment they realize they forgot to factor the closing costs into their budget.
The Rundown on Closing Costs
A commonly overlooked part of the home-buying process, closing costs typically account for 2% to 5% of the fees association with your real estate purchase. For Florida residents, the average closing-cost fee lingered around $2,200 in 2017. Naturally, the amount of money paid for closing the deal on your home is influenced by a number of different factors, but here are the most common service charges that make up the average homebuyer’s closing-cost fees:
- Application Fee for Mortgage: Varies depending on your lender, but expect to pay anywhere from $200 to $400.
- Appraisal Fee: If you’re unable to convince the seller to pay for the appraisal, you’ll have to pay for the home to be appraised.
- Inspection Fee: It’s common practice for lenders to require a home inspection before approving a mortgage, especially home loans backed by the government.
- Private Mortgage Insurance (PMI): More often than not, interested homebuyers who put a down payment less than 20% are required to get PMI to protest the lender in the event that you default on the loan. The fee associated with this varies from lender to lender, but it’s usually between 0.3% and 1.2% of your mortgage amount.
- Homeowners Insurance: Generally speaking, your lender is going to require you to have homeowners insurance on your property while it’s mortgaged. In most situations, you’re also expected to pay the first year’s premium upfront, usually when closing on the home. This amount varies, depending on a number of different factors, like the value of the home, its location, and whether you’re living in an area vulnerable to natural disasters.
- Recording Fee: Typically under $100, the recording fee is paid to the local government to record your transaction.
- Transfer Tax: Varies depending on your state and local government, this fee is paid when transferring a property from one person to another.
These are just some of the closing costs commonly associated with purchasing a home. For a more comprehensive look at closing costs and how to properly prepare for them, have a look at the Closing Cost Calculator by SmartAsset.
As soon as you’re ready to purchase your dream home, the Edge Group at Keller Williams is here to make the home-buying process as convenient as possible. With offices in Tampa, Orlando, Jacksonville, Ft. Lauderdale, and the DeBary Area, the Edge Group is happy to take care of all your Florida real estate needs.