Buying a Southwest Florida home is an exciting time and the more you know about the settlement process, the more relaxed you will be.
Several things happen during the closing:
The buyer (or his/her bank) delivers a check for the balance owed on the purchase price.
The seller signs the deed over to the buyer, and delivers the keys.
A title company, lawyer or civil law notary registers the new deed with the local land registry office.
The seller receives a check or bank transfer for the proceeds of the sale, less closing costs and mortgage payouts.
Often times Southwest Florida buyers, especially first time buyers, forget to take closing costs into account when considering the price of a home. Closing costs are fees that are added to the down payment when purchasing a Southwest Florida home and usually range from $5,000-$10,000, depending on the home’s value.
And they are separate from the down payment.
Some of the fees involved with the closing include a lender fee for processing the loan, title company fee for handling the paperwork and a surveyor fee. Closing costs cannot be neglected. They are typically split between the buyer and the seller, and broken down into two types – “recurring” and “non-recurring.”
- Recurring closing costs are what buyers have to pay ongoing. Money for these costs are often negotiated and placed in a fund by the seller so there is money available to the buyer/homeowner at the end of the year. Recurring costs include items such as: property tax, mortgage insurance , flood and fire Insurance, etc.
- Non-recurring closing costs (junk fees) are one time costs at the time of purchase and include such items as: escrow fees, title Insurance, title search, attorney fees, notary fees, home inspection, recording fees, appraisal fees, credit check, document preparation and transfer fees, etc.
Most home-sale contracts entitle you to a walk-through inspection of the property 24-hours before closing to ensure the property has been vacated and left it in the condition specified in the sales contract.
Who is Present at The Closing?
- You, the buyer (mortgagor)
- The lender (mortgagee)
- Home seller
- Home seller’s real estate agent
- Closing agent
- Title company representative
Closing Documents You Will Receive
- HUD-1 settlement statement – is a detailed list of all costs related to the sale of the home. The HUD-1 is not an estimate, rather, is a precise record of the settlement costs. Both you as the buyer and the seller sign it. You can download a copy of the HUD-1 form to see all of the items listed on the form.
- Final TILA statement – outlines the final version of the cost of your loan and the APR, and also takes into account any modifications made to your rate and points between application and closing.
- Mortgage note – states your promise to repay the mortgage. It indicates the amount and terms of the loan, and what the lender can do if you fail to make the payments.
- Mortgage or deed of trust – secures the note and gives your lender a claim against the home if you fail to live up to the terms of the mortgage note.
- Certificate of occupancy – If you are buying a newly constructed house, you need this legal document to move in.
Once all settlement documents have been reviewed and signed by all parties, the house keys are given to the buyer.
Congratulations on the purchase of your new Southwest Florida home!
Glossary of Most Closing Cost Terminology
- Appraisal Fee – A one-time fee to pay an independent appraiser.
- Credit Report Fee – A one-time fee covering the cost of obtaining a current credit report.
- Document Preparation Fee – Depending on the transaction, there may be a separate fee covering the preparation of the final legal papers.
- Homeowners Fee – Some homeowners associations may require an up-front deposit or dues, as well as a fee to transfer their records from seller to buyer.
- Loan Discount Fee – A one-time fee to adjust the yield on the loan to what market conditions demand (often referred to as “points”).
- Loan Origination Fee – A one-time set-up fee charged by the lender for their administrative costs.
- Escrow and Title Charges – The title company will charge fees for the title policies, additional endorsements, recording fees, escrow, and any additional services such as release tracking or special couriers.
- PMI Premium – Depending on the down payment, the buyer may have to pay an additional up-front fee for mortgage insurance.
- Prepaid Interest – Per diem charge that is calculated depending on the time of the month the transaction closes.
- Taxes & Hazard Insurance – Property taxes will be brought current in escrow. Depending on the month the transaction closes, the seller may be required to credit the buyer for property taxes which are not yet due but not yet payable either. The buyer will have to pay a year’s hazard insurance premium up-front and may be required to put a certain amount for taxes and insurance in a reserve account, which is held by the lender.