The process of buying a new home is overwhelming and exciting. While you are probably aware of many costs associated with purchasing a home, such as monthly mortgage payments and homeowners insurance, other expenses may come as a surprise.
Homebuyers need to factor in additional costs to the home’s total price. This complete cost guide to buying a home in Florida breaks down these expenses of purchasing a home, so you know what to expect when it’s time to sign the papers.
Costs Associated With Buying a Home
There are many costs associated with buying a home. From the mortgage payment itself to the home inspection and closing costs, purchasing your home means paying various fees and calculating more than the price tag on the property listing. The following are standard costs involved during the home buying process.
It is important to note that these costs are listed separately; however, many times, mortgage payments and insurance costs are combined. For instance, homeowner’s or mortgage insurance and property taxes are typically lumped into your monthly mortgage payment, while home inspections and title searches are rolled into closing costs. Sometimes the buyer can negotiate these costs with the seller to be covered on their end. It is a good idea to work with an experienced South Florida realtor who can help you discuss some of these costs with the seller’s realtor.
- Mortgage Payment
A monthly mortgage payment is the most obvious cost associated with buying a home. For most people, buying a home means taking out a loan to purchase the house. The loan amount is based on the asking price, your down payment amount, and your monthly payment is determined by the term of the loan and the annual percentage rate (APR) the lender offers. Determining this cost is one of the critical steps to buying a home in Florida since it is the biggest expense when purchasing a home.
- Homeowners Insurance
Homeowner’s insurance is a necessary cost of buying a home. Lenders require you to purchase homeowners insurance for your property that covers personal injury, interior or exterior damage, and loss of property or assets. The insurance price depends on various factors, such as your home’s location and the bank’s coverage requirements.
- Mortgage Insurance
Mortgage insurance is another potential cost for homebuyers, mainly if they utilize an FHA loan or the bank sees them as a risky investment. If you are making less than a 20% down payment, you may be required to purchase mortgage insurance before closing on your home.
- Property Taxes
Property taxes are another cost to consider. These taxes pay for schools, road improvement, libraries, sewer upkeep, etc. Property taxes are paid in arrears, meaning they are paid one year behind, so the seller is responsible for the property taxes for the year you purchase the house.
The amount is prorated depending on the date of the sale, and the seller gives the buyer credit for the taxes. You do not pay for property taxes upfront; however, you are responsible for using this credit to pay the taxes when they are due at the end of the year.
- Closing Costs
Closing costs refer to several finalizing fees of buying a home. Closing costs are approximately 5% of the total loan amount. They include expenses incurred during the real estate transaction, such as loan origination fees, administrative fees, credit report fees, title searches, mortgage points, home appraisals and inspections, and property taxes.
- Home Inspection and Appraisal
Whether the home inspection and appraisal are included in the closing fees or not, expect to factor them into the cost of buying your home. A listed home inspector performs a home inspection to determine the condition of the house. This small cost can save you big bucks later on if a significant element needs to be replaced, as you can often negotiate to have the seller fix big-ticket items before you purchase.
A home appraisal is covered by either the buyer or seller and is performed by an appraiser who determines the property’s value. This process is important, especially to lenders, because they don’t want to lend more than the home’s value. Although each of these reports costs a few hundred dollars, they save you money in the long run.
- Recording Fees
Recording fees are often included in closing costs. These are fees charged by the county where the real estate transaction takes place in exchange for recording or registering the transaction. This means filing the mortgage information or deed with the county as a time-stamped document. The fees are generally low but vary by county.
In addition to understanding the costs that buyers are responsible for during the homebuying process, it is also helpful to look at the seller’s costs. Some costs responsibilities are negotiable during the process, but for the most part, sellers are responsible for the following expenses:
- Commission to Real Estate Agent
As a buyer, you do not pay your real estate agent directly. Both your real estate agent and the seller’s agent are paid from the profits they make on the sale of the property. This means you are paying for the home, but the seller is paying for the transaction.
- Title Search
Typically in Florida, the seller pays for a title search. It confirms the legal ownership of the property and ensures that there are no liens against the house. Lenders require this document before closing to verify the correct preparation of documents for the transfer of ownership.
- Outstanding Balances
Before the seller can complete the sale, they must pay all outstanding liens on the property. These expenses include Homeowners Association (HOA) dues, property taxes, and even utility bills.
Look for Your Dream Home Today
The costs of buying a home are many, but if you’re financially prepared, they shouldn’t stop you from purchasing the house of your dreams. Work with an experienced realtor like Bryan Gold to find a home in South Florida that meets your budget needs along with your ideal location and aesthetic.
Bryan Gold draws on seven years of experience to help you negotiate with the seller to lower or split some of the costs of buying a home while you work with your lender to close on your investment. Bryan uses technology and proven strategies to get you the best deal possible on your dream home. Contact Bryan today to find out more at (954) 464-3459 or bryan.gold@compass.com.
