It’s the big day. You made it. Congratulations! Welcome to Homeownership…. ALMOST!
This is the day you go to the title or escrow company, sign your name on the dotted line, hand over big money and prepare to take ownership of your new home.
It’s also the day that you and the seller will pay “closing” or settlement costs, an accumulation of separate charges paid to different entities for the professional services associated with the buying and selling of real property.
It’s too often a day filled with uncertainty and stress and lots of paperwork signing.
To help you better prepare and understand this confusing subject, the American Land Title Association has answered some of the questions most commonly asked about title, closing and closing costs.
What services will I be paying for when I pay closing costs?
As a buyer in Northeast Florida your typical closing costs will include appraisal fees, loan fees, inspection and pest (WDO-wood destroying organisms) inspection fees, pro-rated home owner association fees or condo association fees, pro-rated property taxes, and in some cases CDD fees (Community Development District).
How much should I expect to pay in closing costs?
The amount you pay for closing costs will vary; however, when buying your home and obtaining a new loan, an estimate of your closing costs will be provided to you by your loan officer pursuant to the Real Estate Settlement Procedures Act (RESPA) after you submit your loan application.
This disclosure provides you with a good faith estimate of what your closing costs will be in the real estate process. And you should shop around for your mortgage to get not only the best interest rate but the best in fees. Some lenders offer closing cost assistance which you should inquire about. An itemized list of charges will be prepared when you close your transaction and take title to your new property. Those charges can add up to 2.5-3.5% of your purchase price if you are budgeting for purchasing your new home.
When buying from a builder (new construction), some additional charges may include other builder pass through costs such as the title insurance fee which in most cases for a resale is a seller closing cost.
Can I pay for my closing costs in installments?
No, and it is easy to understand why. Many different parties will have fulfilled their responsibilities and be awaiting payment upon closing. The title or escrow company will disburse money to those parties, pursuant to the escrow instructions, when funds are available.
Will I be allowed to write a personal check to cover my closing cost?
Most title companies in Florida are issuing this statement on all of their communications. “Due to the overwhelming number of fraudulent cashier’s checks circulating in Florida, we must request all cash to close to be tendered in the form of a wire transfer in order to ensure a timely and fully funded closing. Our wiring instructions will be sent with every closing transaction and are available upon request. Thank you for your understanding and cooperation.”
So personal checks are no longer an acceptable method for paying closing costs.
How much can I expect to pay for Title Insurance?
This point is often misunderstood. Although the title company or escrow office usually serves as a meeting ground for closing the sale, only a small percentage of total closing fees are actually for title insurance protection. Typically Title Insurance in North-East Florida is a Seller expense paid on behalf of the buyer.
Your title insurance premium may actually amount to less than one percent of the purchase price of your home, and less than ten percent of your total closing costs. The title policy is good for as long as you and your heirs own the property with the payment of only one premium.
In Florida Title Insurance Rates are calculated as follows: $5.75 per thousand up to 100,000; $5.00 per thousand 100,000 to 1 million; $2.50 per thousand over 1 million. Regulations require charging for title search, examination and closing fees.
Click here for a quick calculation of your title insurance cost in Florida.
Why are separate owner’s and lender’s title insurance policies issued?
Both you and your lender will want the security offered by title insurance.
Your home is an important purchase, and you will want to be certain your home is yours, all yours. Title insurance companies insure your rights and interests in order to protect you against claims.
Your lender is looking to insure the enforce-ability of their lien on your property and marketability. What is meant by “marketability”? Local lenders will originate a loan here, and, often, sell it to an out-of-state investor. This investor, who may never see the property, needs to know that he has a valid and enforceable lien. Title insurance is the way of making certain. Without a current title policy, the loan is essentially unmarketable.
What does my Title dollar pay for?
Title insurers, unlike property or casualty insurance companies, operate under the theory of risk elimination.
Risk elimination can only be accomplished after an intensive period of risk identification.
Title companies spend a high percentage of their operating revenue each year collecting, storing, maintaining and analyzing official records for information that affects title to real property. The issuance of a title insurance policy is highly labor-intensive. It is based upon the maintenance of a title “plant” or library of title records, in many cases dating back over a hundred years. Each day, recorded documents affecting real property are posted to these plants so that when a title search on a particular parcel is requested, the information is already organized for rapid and accurate retrieval.
Trained title experts are able, with the aid of their extensive title plants, to identify the rights others may have in your property, such as recorded liens, legal actions, disputed interests, rights of way or other encumbrances on your title. Before closing your transaction, you can seek to clear those encumbrances which you do not wish to assume.
The goal of title companies is to conduct such a thorough search and evaluation of public records that no claims will ever arise. Of course, this is impossible–we live in an imperfect world, where human error and changing legal interpretations make 100 percent risk elimination impossible. When claims do arise, title insurance companies have professional claims personnel to make sure that your property rights are protected pursuant to the terms of your policy.
To conclude, when you pay for your title insurance policy, you are paying for a team of professionals who have worked together to deliver you a title insurance policy which represents protection for your ownership of real property.
Who can I look for straight answers on Title, Closing, and closing costs?
Title or escrow company personnel are available to review and explain your title policy and your closing statement.
Typically, the seller who is paying for the title insurance will select the Title or escrow company to conduct the closing. The title company imposes costs for their services in addition to the title insurance policy so it is important for the seller to shop for the best services. If the buyer chooses to pay for the title insurance policy, the buyer would then have the option of choosing their title company.
These are just a few of the many excellent Title Companies in the North-East Florida, greater Jacksonville region who will help you through the process of closing and finalizing your new home or condominium purchase! And we will all be there to celebrate with you and hand you your keys!
Author: Kathleen Floryan with contribution from CLTA