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Closing costs: what you need to know before buying a home

Updated: May 7

Closing costs: what you need to know before buying a home

Buying a home in Florida involves more than just saving for a down payment. A significant part of the process is understanding and preparing for closing costs - those additional fees that can make up 3% to 6% of your loan amount.

This blog post will demystify what these costs entail, how they differ with various types of loans, and provide practical tips on how you might reduce them. Ready? Your journey to becoming an informed homebuyer starts here!

Key Takeaways

Closing costs are additional fees that make up 3% to 6% of your loan amount when buying a home in Florida.

Buyers are typically responsible for covering the majority of closing costs, which can include application fees, appraisal fees, attorney fees, and property taxes.

Sellers can provide concessions to help offset some of the buyer's closing costs, depending on the type of loan being used.

Different types of loans like conventional loans, FHA loans, VA loans, and jumbo loans have different impacts on closing costs.

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Understanding Closing Costs

Understanding Closing Costs

Closing costs are the fees and expenses associated with finalizing a home purchase, and it is important for home buyers to understand their significance.

Definition of Closing Costs

Closing costs are a crucial part of the real estate transaction that many homebuyers might overlook. They entail expenses incurred over and above the price of the property in finalizing a mortgage.

These payments often include charges for services such as an appraisal to determine the worth of your house, obtaining an official record of who owns the property (title search), as well as legal fees.

Additionally, costs associated with processing your loan application (loan origination), assessing creditworthiness (credit evaluation) and managing transfer documents between buyer and seller (escrow fee) come under closing costs too.

In Florida's market, these can make up 2%-5% of your purchase price but vary depending on factors like type of loan and location.

Importance of Closing Costs in Home Buying

Closing costs play a significant role in the process of buying a home. They consist of various expenses and fees associated with finalizing the mortgage, such as application fee, attorney fees, appraisal, homeowners association transfer fees, and property tax.

It's important to anticipate these costs so that they don't catch you off-guard after making your down payment. Additionally, closing costs can vary based on different types of loans including conventional loans, FHA loans, VA loans or jumbo loans.

This is why understanding closing costs helps home buyers plan their budget more accurately and navigate the mortgage process smoothly. Remembering that seller concessions may cover some of these costs during negotiations often eases the financial burden for many first-time homebuyers.

Determining Average Closing Costs in Florida

Determining Average Closing Costs in Florida

To determine the average closing costs in Florida, you need to consider various fees such as the application fee, appraisal fees, attorney fees, homeowners association transfer fee, and property tax.

Application Fee

The application fee is an essential part of any home purchase. This upfront payment covers the lender's cost to process your loan application and includes expenses such as credit checks and administrative services.

Note that fees vary depending on the lender, so you'll want to inquire about this cost when shopping for a mortgage. It's crucial not only compare interest rates but also factor in these additional charges when making a decision about which lender to choose.


Appraisals play a key role in the home buying process. In Florida, as part of closing costs, appraisal fees come into the picture during mortgage applications. Banks and lenders require an appraisal to determine the value of a property before approving a loan.

This step ensures that they are not lending more money than what the house is worth. Buyers usually shoulder this fee; however, negotiations can take place for sellers to cover these costs as concessions.

Appraisal fees form just one segment of potential expenses on your journey towards homeownership in Florida's sunshine-filled locales.

Attorney Fees

Attorney fees are an important aspect of determining the average closing costs in Florida. These fees can vary depending on state and local rates. When buying a home, it's common for buyers to hire an attorney to ensure all legal aspects of the transaction are handled properly.

Attorneys assist with tasks such as reviewing contracts, conducting title searches, and providing legal advice throughout the process. While attorney fees add to the overall closing costs, their expertise can provide peace of mind during this significant investment.

Homeowners Association Transfer Fee

The Homeowners Association Transfer Fee is a closing cost that home buyers in Florida need to be aware of. This fee, which varies depending on the homeowners association and terms of the sale, is typically paid by the buyer at closing.

It covers the expenses associated with transferring ownership within the homeowners association. It's important to note that this fee is separate from other closing costs like appraisal fees and title insurance.

Property Tax

Property tax is a fee that homeowners pay to the local government in order to fund public services such as schools, roads, and fire departments. The amount of property taxes you'll pay depends on your home's location and its assessed value.

When closing on a home, lenders may require you to pay up to a year's worth of property tax dues upfront. You can estimate your property taxes by using public records and the appraised value of your home.

Remember that property taxes are an ongoing expense that you will need to budget for as a homeowner.

Who Pays for the Closing Costs?

Who Pays for the Closing Costs

The buyer and seller both have roles to play in paying for closing costs.

Role of the Buyer

Buyers play a crucial role in covering the majority of the closing costs when purchasing a home in Florida. It is typically their responsibility to handle expenses such as appraisal fees, attorney fees, and property taxes.

Buyers can also negotiate with sellers to have them contribute towards these costs as part of their concessions. Additionally, buyers receive a Closing Disclosure document at least 3 business days before the closing meeting, which provides an itemized list of all the closing costs they need to cover.

By understanding their role and being proactive in negotiating and reviewing these expenses, buyers can ensure a smooth and transparent home buying process.

Role of the Seller

The seller plays an important role in the closing costs of a home purchase in Florida. While it is typically the buyer who pays the majority of these costs, sellers can provide concessions to help cover some of these expenses.

The amount of concessions that sellers can contribute depends on the type of loan being used. For conventional loans, the seller's contribution is determined by the percentage of down payment made by the buyer.

FHA loans have a contribution limit of 6% based on either the appraised value or purchase price, while VA loans allow for seller concessions to be applied to various fees and are limited to 4%.

Different Types of Loans and Their Impact on Closing Costs

 Different Types of Loans and Their Impact on Closing Costs

Different types of loans, such as conventional loans, FHA loans, VA loans, and jumbo loans, can have different impacts on closing costs.

Conventional Loans

Conventional loans are a popular choice for homebuyers because they offer flexibility and require a minimum down payment of just 3%. However, buyers can choose to put down a higher percentage to avoid paying private mortgage insurance (PMI).

When it comes to closing costs, conventional loans can include fees such as application fees, appraisal fees, attorney fees, and credit reporting fees. Additionally, buyers may need to pay for discount points to lower their interest rate.

It's important to note that if the down payment is less than 20%, buyers may also need to pay for mortgage insurance.

FHA Loans

FHA loans, or loans insured by the Federal Housing Administration, are a popular option for homebuyers, especially those who are purchasing a house for the first time or have lower credit scores.

These loans offer benefits such as lower down payment requirements and more lenient credit score criteria. However, it's important to note that FHA loans may come with higher closing costs compared to conventional loans.

This is due to additional insurance requirements associated with FHA loans. Keep in mind that there is a contribution limit of 6% based on the appraised value or purchase price when it comes to FHA loan closing costs.

VA Loans

VA loans are a type of mortgage available to eligible veterans, active-duty service members, and surviving spouses. These loans have different closing costs compared to other types of loans.

One major benefit is that VA loans do not require a down payment, which helps reduce closing costs for buyers. Additionally, sellers can contribute up to 4% of the loan amount towards the buyer's closing costs for VA loans.

It's important to note that VA loans also have a funding fee that is typically added to the loan amount and can impact closing costs. So if you're a veteran or active-duty service member looking to purchase a home, VA loans could be an excellent option for minimizing your upfront expenses.

Jumbo Loans

Jumbo loans are specifically designed for high-priced or luxury homes. These loans often come with higher interest rates compared to conventional loans, making them more expensive in the long run.

In addition, jumbo loans require a larger down payment than other types of loans, which can be a significant financial burden for homebuyers. It's important to note that eligibility requirements for jumbo loans are stricter as well, including higher credit scores and lower debt-to-income ratios.

These factors can have a significant impact on closing costs, resulting in higher fees and expenses for borrowers.

The Costs of Refinancing: Understanding Closing Costs, Fees, and Potential Savings

The Costs of Refinancing: Understanding Closing Costs, Fees, and Potential Savings

Refinancing a mortgage can provide homeowners with the opportunity to save money on their monthly payments or access cash for other purposes. However, it's important to understand the costs involved in refinancing and how they can impact your potential savings.

When refinancing, borrowers will need to consider closing costs, which are fees associated with the loan transaction. These costs typically include appraisal fees, attorney fees, title insurance, and loan origination fees.

On average, closing costs for refinancing in Florida range from 2% to 5% of the loan amount.

By understanding these closing costs upfront, homeowners can make an informed decision about whether refinancing is financially beneficial for them. It's essential to calculate how long it will take to recoup these upfront expenses through lower monthly payments or interest savings over time.

Ultimately, if the potential savings outweigh the closing costs over a reasonable period of time, refinancing may be a viable option for homeowners looking to improve their financial situation.

Mortgage Refinancing in Florida: The Ultimate Guide to Lowering Your Monthly Payments & Saving Money

When considering mortgage refinancing in Florida, it's essential to understand how it can help lower your monthly payments and save you money in the long run. Refinancing allows homeowners to replace their current mortgage with a new one, often at a lower interest rate.

By securing a lower interest rate or extending the loan term, homeowners can reduce their monthly payments and potentially save thousands of dollars over time.

One crucial factor to consider when refinancing is closing costs. These expenses are paid at the time of closing and can include appraisal fees, attorney fees, title insurance fees, and more.

It's important for homeowners to be aware of these costs upfront so they are not caught off guard by unexpected expenses.

To minimize closing costs when refinancing your mortgage in Florida, it's recommended that you shop around for lenders and compare their offers. Negotiating with lenders may also help reduce these costs.

Additionally, asking the seller to contribute towards closing costs can further decrease the financial burden on homeowners during this process. With some careful planning and strategy, you can take advantage of mortgage refinancing in Florida to lower your monthly payments and save money over time.

Tips to Reduce Closing Costs

Shop around for lenders, negotiate with them, and consider asking the seller to contribute towards closing costs.

Shopping Around for Lenders

Shopping around for lenders is a crucial step in reducing closing costs when buying a home in Florida. By comparing different lenders and their estimates for closing costs, buyers can find the best deal available to them.

It's important to ask potential lenders about any origination fees or other charges that may affect the total closing costs. Buyers should also be aware that they have the ability to negotiate with lenders to potentially waive or reduce certain fees.

Additionally, some lenders may offer discounts or promotions that can help lower overall closing costs.

Negotiation Strategies

Buyers have the opportunity to reduce their closing costs through effective negotiation strategies. One strategy is to negotiate with the seller to cover some or all of the closing costs as part of their concessions.

This can help alleviate some of the financial burden associated with purchasing a home. Depending on the type of loan, buyers may also be able to negotiate seller concessions that vary based on their down payment percentage.

It's crucial for buyers to research and understand closing costs before entering into negotiations, allowing them to advocate for themselves and potentially save money in the process.

Asking the Seller to Contribute

Buyers have the option to negotiate with sellers and ask them to contribute towards their closing costs. This can help alleviate some of the financial burden associated with purchasing a home.

Seller concessions for conventional loans typically depend on the down payment percentage, ranging from a maximum of 9% for down payments of 25% or more to 3% for down payments less than 10%.

For FHA loans, seller contributions are limited to 6% based on the appraised value or purchase price. VA loan seller concessions can be applied to various fees and are capped at 4%.

FAQs on Closing Costs

How can you estimate closing costs? When are closing costs paid? Can closing costs be included in the mortgage loan? Discover the answers to these frequently asked questions and more.

Read on to gain a comprehensive understanding of closing costs before buying a home in Florida.

How to estimate closing costs?

To estimate closing costs, you should consider a range of 3% to 6% of the loan amount. This will give you a good estimate of what you can expect to pay. Keep in mind that the specific closing costs will vary depending on factors such as the type of loan and your location.

It's also worth noting that buyers can negotiate with sellers for concessions to have some or all of their closing costs covered. Maximizing seller concessions is particularly important for conventional loans, as they have a maximum percentage based on the down payment amount.

By considering these factors and negotiating effectively, you can get a better estimate of your closing costs when buying a home.

When are closing costs paid?

Closing costs are paid at the closing of a home purchase. This means that they are paid when you finalize the sale and officially become the owner of the property. It's important to note that closing costs are typically paid in one lump sum, so you'll need to have those funds available on or before the designated closing date.

Both buyers and sellers contribute to closing costs, although it's usually the buyer who pays most of them. Remember, these costs can range from 3% to 6% of the loan amount, so it's essential to budget accordingly and be prepared for this expense when purchasing a home.

Can closing costs be included in the mortgage loan?

Closing costs can be included in the mortgage loan. These costs are the expenses that go beyond the down payment and are paid at closing when buying a home. By including them in the mortgage, buyers can spread out the cost over time instead of paying for them upfront.

This can make it more manageable for buyers who may not have enough funds to cover both the down payment and closing costs at once. It's important to note that including closing costs in the mortgage loan will increase the overall amount borrowed and impact monthly payments, so buyers should consider this when determining their budget.

Down Payment Assistance: An Essential Guide for Home Buyers

Many home buyers struggle with saving up for a down payment, which can often be a significant hurdle to overcome. That's where down payment assistance programs come in. These programs are designed to help potential home buyers by providing them with financial support towards their down payment and closing costs.

Down payment assistance programs can vary depending on location and eligibility criteria, but they typically offer grants or loans that do not have to be repaid as long as the buyer meets certain requirements, such as living in the property for a specific period of time.

These programs can greatly reduce the upfront costs associated with buying a home and make homeownership more attainable for those who may not have enough savings.

It's important for home buyers to research and explore the different down payment assistance options available to them. Local government agencies, non-profit organizations, and even some lenders may offer these programs.

By taking advantage of down payment assistance opportunities, home buyers can make their dream of owning a home a reality without breaking the bank.



In conclusion, understanding closing costs is crucial for any homebuyer in Florida. It's important to know what these expenses cover and how they can impact your budget when buying a home.

By researching average closing costs, exploring loan options, and utilizing tips to reduce costs, you can navigate the process with confidence and make informed decisions about your purchase.

Remember, being prepared and knowledgeable about closing costs will help ensure a smooth and successful homebuying experience in the Sunshine State.


What are closing costs when buying a home in Florida?

Closing costs involve various fees and expenses, like escrow funds, lender's title insurance, pest inspection fee, and survey fee you need to pay before getting your home loan.

How do I calculate the closing cost of my new home?

Calculate your closing cost by adding up individual fees like appraisal charges for property description checking, second mortgage rate lock fee, homeowners insurance premiums and transfer tax.

Are there ways to reduce the amount paid for closing costs?

Yes! You can negotiate with service providers or opt for credits toward closing costs using government programs or state finance agencies.

Can anyone help me understand the Loan Estimate at closing?

You could approach professionals from places like Rocket Mortgage or through guides available online that breaks down every aspect of Loan Estimate provided during closings which includes tax service fees and endorsements.

Will I have to pay additional fees if I refinance my house?

Yes, you will typically face one-time closing costs again while refinancing a house that may include notary fees wire transfers deposits into an escrow account along with other recurring mutual mortgage insurance premiums

What is included in settlement statement during a home purchase in Florida?

The settlement statement given during a home purchase includes all financial transactions including loan underwriting charge HUD-1 form delivery,Courier Charges,title policies,and final loan documents made before obtaining your house keys.

Philip Bennett

Philip Bennett

Philip is the owner and Licensed Mortgage Broker at Bennett Capital Partners, Bus. NMLS # 2046828. He earned his degree in Accounting and Finance from Binghamton University and holds a Master's Degree in Finance from NOVA Southeastern University. With more than 20 years of experience, Philip has been a leader in the mortgage industry. He has personally originated over $2 billion in residential and commercial mortgages.

Learn more about Philip Bennett's background and experience on our Founder's page. Whether you're a first-time homebuyer or a seasoned real estate investor, our team is here to help you achieve your real estate goals. Don't wait any longer, contact us today and let us help you find the right mortgage for your needs.

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