The Real Costs of Buying a Home in Florida

The purchase price is the biggest number in a home purchase, but it’s not the only one. Between the day your offer is accepted and the day you get keys, you’ll pay for inspections, a deposit, lender and title charges, Florida taxes on the loan, insurance and more. After closing, property taxes and insurance become ongoing costs. This guide explains each category so you can plan for it, and so nothing on your closing disclosure is a surprise.

We won’t quote typical dollar amounts here, because they depend on the price, the loan, the property and the contract. Your lender’s Loan Estimate and your title company’s figures are where the real numbers come from.

Before closing: money you spend up front

Earnest money deposit. When your offer is accepted, you’ll put down a deposit, usually held by the title company, an attorney or a broker’s escrow account. It’s credited toward your purchase at closing. The contract spells out when you could lose it, so read that part carefully.

Inspections. Home inspection, wood-destroying organism (termite) inspection, and, depending on the property, a four-point and wind mitigation inspection for insurance, a septic inspection, a well water test, a survey, or a pool inspection. These are usually paid when performed, not at closing.

Appraisal. If you’re financing, your lender will order an appraisal. Some lenders collect this fee up front.

Closing costs

Closing costs fall into a few groups. Who pays which item is negotiated in the contract, so the split can vary from deal to deal.

Lender charges. Origination fees, discount points if you choose to buy down your rate, credit report and underwriting fees. Your Loan Estimate lists these.

Title and closing charges. The settlement or closing fee, title search, lender’s title insurance policy, and, depending on the contract, the owner’s title insurance policy. Title insurance protects against problems with ownership that weren’t found or weren’t fixed before closing.

Government recording fees and Florida taxes. Florida charges documentary stamp taxes and an intangible tax that buyers with a mortgage will see:

• Documentary stamp tax on the note: 35 cents per $100 of the loan amount, under Fla. Stat. 201.08.
• Nonrecurring intangible tax on the mortgage: 2 mills (0.2%) of the amount secured, under Fla. Stat. 199.133.
• Documentary stamp tax on the deed: 70 cents per $100 of the price, under Fla. Stat. 201.02. Who pays the deed stamps is set by your contract.

Cash buyers don’t pay the note stamps or intangible tax, since there’s no mortgage.

Prepaids and escrow deposits. Lenders usually collect your first year of homeowners’ insurance up front, and set up an escrow account for future taxes and insurance by collecting a cushion at closing. You may also prepay interest from the closing date to the end of the month.

Property tax prorations

Florida property taxes are due on November 1 for the current calendar year, under Fla. Stat. 197.333. Because the bill comes late in the year, the seller usually hasn’t paid that year’s taxes at closing, and the contract typically splits them: the seller gives you a credit for their share of the year, and you pay the full bill in November.

Your new property tax bill may be higher

This is one of the most common surprises for Florida buyers. Florida law requires a disclosure warning you not to rely on the seller’s current tax bill, because a change of ownership triggers reassessment. That disclosure is required by Fla. Stat. 689.261.

If the seller had a homestead exemption and the Save Our Homes cap, their assessed value may be far below market value. After you buy, the property is reassessed as of January 1 of the following year, under Fla. Stat. 193.155. You can look up the property and the current exemptions on the Lake County Property Appraiser website.

If the home will be your permanent residence, apply for your own homestead exemption. Under Fla. Stat. 196.011, the application is due by March 1 of the year you’re claiming it, with the property appraiser’s office.

Insurance

Homeowners’ insurance is required by your lender and is a significant cost in Florida. Get quotes during your inspection period, since roof age, electrical panels and plumbing type can affect price and availability.

Flood insurance is separate. Standard homeowners’ policies don’t cover flood, which is also stated in the flood disclosure sellers must give under Fla. Stat. 689.302. If the home is in a FEMA Special Flood Hazard Area and you have a federally backed loan, your lender will require it. Check the FEMA Flood Map Service Center and FloodSmart.gov for more.

Mortgage insurance

If you put down less than 20% on a conventional loan, the lender will usually require private mortgage insurance (PMI). FHA loans have their own mortgage insurance premiums. Ask your lender how and when it can be removed on your loan type.

HOA costs

If the home is in a community with a mandatory association, you’ll pay regular assessments and possibly special assessments. The seller must give you a disclosure summary under Fla. Stat. 720.401. Some associations also charge transfer, application, or capital contribution fees at closing.

Buyer budgeting checklist

• Get a Loan Estimate from your lender before you make an offer.
• Set aside money for inspections and the deposit.
• Get insurance quotes, including flood, during your inspection period.
• Estimate property taxes based on the price, not the seller’s bill.
• Ask for HOA fees, transfer fees and any pending special assessments.
• Review your Closing Disclosure carefully when it arrives before closing.

We’re glad to walk through the numbers

If you’re thinking about buying in North Lake County, RLW Realty can help you understand each line on your estimate and point you to local lenders, inspectors and title companies. Give us a call or stop by our Umatilla office.

This guide is general information, not legal or tax advice.