Buying a home is an exciting milestone in life, but understanding the total cash required to make this dream a reality is crucial. Beyond the down payment, there are several upfront costs associated with buying a home that you need to consider.
Florida is different from some other states when it comes to customary fees. For example, in Fort Myers (Lee County), it is customary for the seller to pay for the Deed Transfer Tax and the Owner’s Title Insurance. Working with a local lender, like Mortgage Warehouse, who knows these things will help you obtain a more accurate estimate of the amount of money you will need at closing.
Let’s explore these costs in detail so you plan your home buying journey more successfully.
Earnest Money Deposit: When you make an offer on a home, you’ll typically include an earnest money deposit to show your commitment to the purchase. This amount can vary but is usually around 1% to 2% of the purchase price. If the sale goes through, this deposit is applied towards your down payment or closing costs.
Down Payment: The down payment is the initial lump sum you pay towards the purchase price of the home. Typically, this amount ranges from 0% to 20% of the home’s purchase price. It can vary depending on the type of loan and your creditworthiness. The larger your down payment, the lower your monthly mortgage payments will be.
Closing Costs: Closing costs are a collection of fees and expenses associated with the purchase of your home. They typically range from 1.5% to 3.5% of the home’s purchase price. These costs can include:
- Loan Origination Fees: Fees charged by the lender for processing your mortgage application.
- Appraisal: Determines the value of the home to assure you are not overpaying and establishes the maximum loan amount.
- Title Search and Title Insurance: Expenses related to verifying the property’s ownership and obtaining title insurance to protect against any legal disputes.
- Settlement Fees: Fees paid to a title company to hold and disburse funds during the closing process.
- Recording Fees: Charges for recording the sale with the local government.
- Transfer Tax: This tax covers the cost to transfer the title from the seller to the buyer.
- State Specific Mortgage Taxes: For Florida, these may include documentary stamps and intangible taxes.
Prepaid Items: Prepaid items are similar to closing costs except that they are held in an escrow account to be distributed at a later date.
- Homeowners Insurance: The first year’s premium for your homeowner’s insurance policy.
- Florida property Insurance is often higher than in most states due to potential hurricanes.
- Lee County has recently experienced hurricanes and coastal flooding in the recent past which makes it especially important to shop out your insurance options.
- Homeowner’s Association (HOA) Fees: Many properties in Fort Myers and throughout Lee County, Florida are located in gated communities that have HOA fees. If you’re buying a property in a community with an HOA, you may need to pay upfront fees or dues. These fees can cover common area maintenance, landscaping, and other shared amenities.
- Property Taxes: In Florida, you won’t be subject to state income taxes, but you will have to pay real estate taxes on your new home. You might have to make advance payments for a portion of these property taxes. The total you’ll be responsible for is contingent upon your property’s assessed value, the local tax rate, and your closing date. The Lee County Property Appraiser is a helpful website for homeowners and homebuyers. https://www.leepa.org/
Don’t forget to budget for moving expenses, utility deposits, and potential home improvements, furniture and décor. You should also make sure you have enough set aside in an emergency fund to provide a cushion for unexpected bills.
As you can see, buying a home involves more than just the down payment. It’s crucial to be aware of the various upfront costs associated with the home buying process. Proper budgeting and financial planning are essential to ensure a smooth transition into homeownership. By considering these costs in advance, you can make informed decisions and avoid any unforeseen financial surprises on your journey to owning your dream home.
How Can Mortgage Warehouse Help?
Mortgage Warehouse offers many programs to help you meet your home ownership goals. Here are two of our most popular Fort Myers programs:
No Closing Costs Loan Program
Mortgage Warehouse’s No Closing Cost Loan can result in more cash available for a larger down payment, more equity in your new home, more cash in your savings account after closing and ultimately lowering the overall cost of obtaining a home loan. Find out more here No Closing Cost Loan.
Home Purchase Incentive Program
Another option is to do our Home Purchase Incentive Program. If you want to minimize your costs, you have the option to consider a lender credit, which can cover insurance, taxes and/or closing costs.
First things first! Are your pre-approved yet? Obtaining a pre-approval letter from a reliable, local Fort Myers mortgage company is one of the best decisions you can make before you start house shopping.
Start your journey here: Get a Free Pre-Approval