Do you know what closing costs are?
Closing costs are the costs of legal proceedings associated with buying or selling a property. The title company in charge of the transaction is the one that handles all the expenses and procedures involved in the closing processes that the buyer and seller incur when buying a property.
How are closing costs calculated?
If the transaction is cash, closing costs are approximately 1.5% to 3% of the purchase value. If you finance it, it can vary between 4% and 5%; this will depend on the cost of the bank when generating the mortgage. When purchased directly from the developer, closing costs can represent 6% and 8% of the purchase value.
Closing costs include:
Loan Application Fee: Most banks or financial institutions charge an initiation fee. The lender may also charge you discount points to lower your interest rate to improve mortgage loan conditions.
Property Appraisal Fee: This report is requested by the lender or bank to ensure the property’s condition and verify that the purchase price is consistent with the most recent sales of similar properties in the same area.
Credit institution costs: These charges are the prepaid interest on the mortgage in advance of the month you will live, usually required to be 12 months in advance.
Reserve deposits: The bank usually requires the buyer to deposit into an account managed and managed by the same financial institution granting the mortgage. These reserve deposits apply to property insurance and local property taxes.
Surveying, Drawing Up, or Recognition Fee: When purchasing a single-family home such as a house with the land; the borrower or bank requires a survey report to ensure that there are no violations or unlawful acquisition by a neighbor of portions of the land or defects related to the title of the property.
Title insurance: Is used in every transaction and studies the history of property transfers to verify that they have been done correctly.
Cost of the lawyer or title company: The buyer has the full right to hire a real estate attorney or title company who will defend their interests during the transfer of the property or during the buying process.
Property registration costs: The deed of purchase and registration of the mortgage 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, and the buyer pays these expenses. The property owner usually pays tax stamp duty at closing time.
Property Inspection: It is recommended that the buyer conduct a property inspection, including termite or destructive organism inspection, roof inspection, electrical, plumbing inspection, etc.
Sales Commission or Real Estate Agent: The real estate or real estate agents involved in the transaction are usually compensated by the property seller. Generally, you should pay anywhere from 6% to 10% sales commission, based on the selling price. In some exclusive representation circumstances, the real estate agent also charges the buyer representation fees, which may be based on a percentage or a fixed cost, which is agreed between the buyer and his real estate agent in advance.