As if taking out a Florida mortgage weren’t expensive enough. (more…)

More Florida mortgage lenders, buoyed by near historically low rates, are now dangling no-closing-cost deals to spark cooling home sales. (more…)

“No fees. No worry. No, really,” the bank’s ad campaign proclaimed. “Relax, you’ve just found the best mortgage deal.” (more…)

Especially in this buyer’s market, it’s become common to ask the seller to chip in on your purchase.

One way in which you can save a decent chunk of money on the transaction is to have this individual pay some or all of the closing costs.

If you wish to ask for such an incentive, keep in mind a few simple rules. On conventional Florida home loans, you can only ask the seller to pay non-recurring costs, not prepaids or items to be paid in advance. If you’re putting ten percent down or more, the most the seller can contribute is six percent of the purchase price. If you are putting less down, the most the seller can contribute is three percent.

On VA loans, you can ask the seller to pay everything. This is called a “VA No-No,” meaning the buyer is making NO down payment and paying NO closing costs. It’s wise for the seller to put a ceiling on the amount they will pay, just to make sure no one gets carried away.

On a FHA Florida mortgage, you can also ask the seller to pay everything. However, the buyer must have a minimum three percent investment in the property, whether that is applied toward down payment, closing costs, or prepaids. The three percent can be from their own pocket or a gift from a family member.

It’s all helpful to keep in mind given the current market. Buyers should feel confident asking for incentives and taking advantage of the leverage they possess.

This isn’t ideal.

The cost of closing a residential Florida mortgage loan is the fifth-highest in the country, according to a survey by an online consumer banking service.

The information compiled bankrate.com was based on the closing costs for a $200,000 loan for a 30-year, fixed-rate Florida home mortgage on a single-family house. Bankrate got eight to 10 estimates in each state and the District of Columbia from the Web sites of online lenders.
The average closing cost in Florida was $3,349. This figure trailed only New York ($3,887), Texas ($3,578), Hawaii ($3,407) and Ohio ($3,354). What accounted for the higher cost in Florida? Probably the cost of title insurance, which was 27 percent higher in the Sunshine State.

Along with the survey, bankrate.com commissioned a national poll of consumers about closing cost fees. It found that 60 percent of homeowners paid in closing costs about what had been estimated by their lender; so at least there isn’t any fraud going on.

If you were thinking about a Florida mortgage home loan, this information shouldn’t be too discouraging. Many sellers are offering incentives in this slow market - and that may mean help with your closing costs. There’s only one way to find out.

Closing costs.

Probably two of the least favorite words in the real estate lexicon, if not the entire English language. You’ve just agreed to borrow $200,000, and make three decades of monthly Florida mortgage payments — and now you have to shell out a few extra grand (cash, no less) for title searches, application fees and other costs.

Ouch! Those fees aren’t nominal, either, especially when you’re paying out of pocket. They average more than $3,000 nationwide, according to a survey released by Bankrate.com. In examining data in all 50 states and Washington, D.C., the study found closing costs included origination fees charged by lenders such as application fees and document processing fees, along with title and appraisal costs that are paid to third parties.

The national average? A hefty $3,024.

“[Closing costs] are not insubstantial, so consumers should shop around when they’re in the market for a mortgage,” said Greg McBride, senior financial analyst with Bankrate.com.

Not only is Miami real estate some of the nation’s hottest, but it carries some of the heftiest closing cost averages. The top five U.S. cities in that quite undesirable department:

• Buffalo, N.Y., $3,887
• Houston, Tex., $3,578
• Honolulu, Hi., $3,407
• Cleveland, Oh., $3,354
• Miami, Fla., $3,349

The major metropolitan areas with the lowest:

• St. Louis, Mo., $2,713
• Detroit, Mich., $2,714
• Concord, N.H., $2,734
• Billings, Mont., $2,737
• Cheyenne, Wyo., $2,772

The surveyed home buyers were also sked if the closing costs they paid when they actually signed the paperwork for their Florida home loan came close to the so-called good faith estimate of closing costs they got from their lenders prior to the official closing.

Some 60 percent said the estimate was right on the mark, but 13 percent said they paid a higher amount than the estimate, and 8 percent ended up paying less. The rest either didn’t know or did not reply.

The survey of closing costs didn’t cover government fees and other items that are essentially passed through by the lender for payment by the borrower. These fees vary significantly by location, and many mortgage advisors warn that some lenders do a notoriously poor job of estimating what the fees are.

As a result, consumers should probably expect that closing costs will be above rather than below the good faith estimate, he said.

One way to keep closing costs down for iterms like title insurance is to make sure you get the best rate — not a given, as many providers simply refer you to their company of choice. Ask the lender to recommend companies that offer cheaper policies, and make sure they offer what they say they do. Also, home seekers should remain on the lookout for “junk fees,” or inflated costs for things like document preparation, that can boost their overall expenses.

OUR ADVICE: Given the current market conditions, a lot of sellers are offering incentives to help their houses stand out among the massive amounts of inventory, and a popular technique is for the seller to pay closing costs for prospective buyers.

Therefore, if you’re looking to buy a house and can arrange this with a seller, it may save you multiple thousands of dollars up front, increasing your Florida home loan borrowing ability — and bargaining — power greatly. With prices so high, that could be the difference maker as to whether you can afford a home. Look around and find the best deal!

There are countless questions/issues to consider as you look into a Florida home loan. Here’s another: once you determine the property you wish to purchase, when should you close on your mortgage? Is there an advantage to signing on the dotted line during a certain time of the month?

Many experts would say YES. Closing on a home requires you to prepay any interest that will accrue on your Florida home mortgage loan from the date of the transaction until the end of the month. Therefore, the closer your closing is to the end of the month, the less you have to pay.

Why you should close later in the month on your Florida home loan

Unlike rent, which is often paid in advance for the upcoming month, Florida home loan payments are generally paid in arrears to cover the previous month. If you close in April, your first mortgage payment won’t be due until June 1 - the start of the first full month afterwards. That payment will include the interest and principal you owe for May.

But interest accrues from the date of closing. If you close April 15, you will also owe 15 days of interest for April. Your lender will therefore add this amount (sometimes called pre-paid interest) to your closing costs. If you close April 29, you will only be charged for two days of interest. Here’s an example of how it works:

Example of up-front savings:
Mortgage amount: $200,000
Interest rate: 7%
Daily interest: ($200,000 x 7%) = $38.36Close April 15: prepay 15 days interest (15 x $38.36) = $575.40
Close April 29: prepay 2 days interest (2 x $38.36) = $76.72

The exact amount you save changes if your closing date changes. If you expect to close on, say, April 29, but the closing is pushed back to May 5, then your prepaid interest closing costs will change dramatically. That’s one reason why people sometimes see big fluctuations in closing costs from the figures originally quoted in the Good Faith Estimate they received from their lender.

Of course, the end of the month can also be a very busy time for closing agents and Florida home loan lenders. You may receive extra personal attention if you avoid this time period. In the big picture, moreover, your interest rates will remain the same - the timing of your closing only impact that first monthly bill. Avoiding this time could mean you’ll receive more personal attention.

In other words, don’t despair if you have to close early in the month - some advisors even recommend it because it won’t have a major impact on the price of your Florida mortgage loan.

Did you know that today’s home buyers are paying EIGHT times more on closing costs than those from 40 years ago? Do you feel as though these fees ripped you off during your Florida home loan process? Afraid of what they’ll amount to as you plan to purchase a new house?

We can help. Listen to how how residents of one Minnesota street were overcharged again and again on their home purchases - many by thousands of dollars - and make sure you avoid these mistakes as you pursue a Florida home loan.

Home buying/closing cost lessons

When Lewis Leung was buying his two-bedroom ranch in St. Louis Park, Minn. in 2004, he read up on mortgages. He got rate quotes from lenders on the Web. He even compared their good-faith estimates of the numerous extra fees he’d have to pay to close the deal.

But did he sign with the lender who quoted him the best combination of rate and fees? Nope. Instead, under pressure to get a loan quickly, he went with the mortgage broker recommended by his real estate agent. Ditto when selecting a title insurer.

“The agent and I looked at a lot of houses together over the months,” Leung explains. “You build up a bit of trust.”

Maybe that trust was misplaced. Going with his agent’s advice cost Leung hundreds of extra dollars in fees and up to $9,320 in higher interest payments over 30 years.

Leung’s agent, Century 21 Luger, benefitted from the process, of course. The realtor’s referrals netted the agency and its affiliates an extra $3,635 on the transaction, though Leung didn’t know it.

“I knew I should do it myself,” Leung says of his decision to go with his agent’s referrals. “But after months of looking for a house, I was tired, and I just didn’t think it would affect my bottom line all that much.”

The complicated home buying process

Anyone that has ever taken out a Florida home loan or bought a house anywhere in the country is aware: while making the biggest financial transaction of your life, there a bundle of fees you don’t quite understand. They’re enumerated on what’s called your HUD-1 document, the mortgage settlement statement you get the day you close, as required by the Department of Housing and Urban Development.

The charges listed include:

• Title insurance
• Settlement fees
• Appraisal fees
• Processing fees
• Document-preparation fees
• Broker’s commission

Most people don’t spend a lot of time on your HUD-1, at least not until it’s too late, because all those fees just run together and don’t seem as though they matter in the big picture - preparing for a Florida home loan is complicated and expensive enough already.

Together, though, these fees add up. Americans spend $110 billion a year buying and selling houses, not including the cost of the homes themselves. While technology has magically lowered the cost of buying everything from airline tickets to stocks to wedding gifts, Florida real estate purchases remain stubbornly expensive.

Regulators have begun to ask why. The Department of Justice sued the National Association of Realtors last fall, claiming that its rigid rules for home listings artificially inflate commissions. And state insurance commissioners in California, Colorado, Florida, Maryland and Ohio have recently uncovered what they say are networks of sham title insurance companies set up to hide illegal rebates to banks, builders and realtors in exchange for steering business their way.

“The current system doesn’t work at all,” says mortgage expert Jack Guttentag, a professor emeritus at the Wharton School and head of Mtgprofessor.com. “Real estate fees are much higher than they’d be if the market worked properly. The whole thing is something of a tragedy.”

The bottom line? Never overlook ANY aspect of a Florida home loan. Ask questions and don’t sign on any dotted lines until you’re satisfied with the answers. Deciding on the best mortgage can be difficult, but understanding the fees involved saves time and money.

What’s the number one complaint that real estate agents make about the mortgage process, and one that bugs the heck out of home buyers as well? Often times, settlement or escrow officials fail to provide a copy of the final settlement sheet in advance of the actual closing, writes syndicated real estate columnist Kenneth Harney.

In a national survey of real estate agents, 50 percent cited the absence of “HUD-1″ closing documents for review a day ahead of the settlement as their biggest complaint. Realtors say that although said documents are required by government regulations, settlement sheets rarely arrive in advance. This denies buyers a chance to view an itemized list of all charges and fees.

“I have yet to see a HUD statement prior to a client’s closing,” one agent said. “It would be nice for buyers to have it in hand at least two days prior to closing, if for no other reason than to let them know what funds they need for settlement.”

Another agent complained that when buyers go to closing with no copy of the HUD-1, closing costs are different from the original quote given to the buyer. Sometimes the estimate is off by over $1,000. The study by Inside Mortgage Finance sampled 1,780 agents and has a 3 percent margin of error. Industry analysts say the findings are shocking.

Think of it this way. What other kind of major purchase can a consumer make without getting information about the final costs and fees until the last second? Can you imagine if you bought a car and were not told the final, bottom line costs ahead of time? The survey also sheds light on when (and if) closing agents must provide a copy of the HUD-1 settlement sheet.

Here’s the skinny:

Though real estate agents and consumers probably believe federal rules give them the right to see the final closing numbers a day ahead of settlement, that’s not entirely accurate. Phillip L. Schulman, an attorney with the Washington, D.C., firm Kirkpatrick & Lockhart Nicholson Graham LLP, says the law only requires a closing agent to provide a borrower the figures a day in advance “if the borrower requests” such a review.

“The fact is that some of these numbers come in very late in the process, just hours or even minutes before the scheduled settlement time,” Schulman said, adding that the closing agent is only required to provide whatever figures the agent actually “has received at that time” from other parties involved in the transaction when estimating closing costs.

Another widely misunderstood point regarding the process is that federal regulations of real estate settlement procedures cannot be enforced when closing agents fail to provide advance copies of the HUD-1 to consumers who request them. Ivy Jackson, who is leading the U.S. Department of Housing and Urban Development’s investigation on settlement complaints, said that his agency simply does not have the authority to penalize any firm that ignores consumers’ requests to review settlement data in advance.

Richard Fritz, an attorney and title agent with Paragon Title & Escrow Co. of Bethesda, Md., says one reason why HUD-1 sheets often are not finalized 24 hours in advance is that services such as his often have to wait for the borrower’s mortgage lender to come through with key information about fees and closing instructions. Other parties delay the process as well, such for as local governments (who have property tax data), homeowners associations (whose fees affect escrow numbers), and even the buyer’s real estate broker (contract details).

“We are always willing to let borrowers see whatever we have received 24 hours in advance, but what we obviously can’t show them is what we haven’t received,” Fritz said, noting that his firm will soon allow all parties to a transaction to inspect files online, 24/7, through a password-enabled, secure website.

Meanwhile, HUD has proposals on the table that would require settlement documents to closely track upfront good faith estimates given to the buyers. Under current rules, final closing numbers can be far off the mark from the upfront estimates, a loophole that allows unethical mortgage officers to lure home loan shoppers with low-ball quotes on fees. The proposals would ensure that good faith estimates on settlement charges would require more, well, good faith.

All things to keep in mind for prospective Florida home loan applicants. Be advised that the estimates you get about closing costs may be well off the mark if you don’t see the data ahead of time, or employ the right agency or agencies. Please see our home purchase guide for a full rundown of what to watch out for along the way.

If you’re applying for a Florida home loan and wish to pay the lowest fees on the market, you’re out of luck - Wyoming holds this distinction. According to a recent survey by Bankrate.com of nationwide closing costs, Florida mortgages were the fifth highest in the country when it came to costs charged for a mortgage (not including taxes, other governmental fees or escrow fees):

1. New York - $3,907
2. Hawaii - $3,628
3. Alaska - $3,620
4. New Jersey - $3,362
5. Florida - $3,196

To put this in perspective: if get a $180,000 mortgage on a single-family home worth at least $225,000, the average buyer in Laramie, Wyo., would pay $2,101 in origination fees, title insurance and other closing costs. The average buyer in New York City, meanwhile, would pay almost twice as much: $3,907 for the same size loan. Nationally, the average fees and title insurance totaled $2,748.

Bankrate surveyed nine to 15 lenders in each state (plus Washington, D.C.) and asked them to estimate the closing costs on a $180,000 loan to a buyer with an excellent credit history, who had made a down payment of at least 20% on a single-family home in the state’s largest city. The survey showed that:

• The biggest differences among states came from the wildly varying costs for title insurance;

• fees for settlement services and title searches accounted for much of the rest of the disparities;

• origination costs – the fees that lenders control — didn’t vary much from state to state (but they did differ from lender to lender).

Comparison shopping - Making the study work for you

Bankrate.com explained its findings more as it tried to help potential home owners. It stated you should compare mortgage offers by adding up all the origination fees and all the title insurance and settlement fees. Ignore taxes and prepaid items when comparison shopping — lenders don’t always estimate those correctly, and they’ll be roughly the same for each lender, anyway.

Keep in mind that costs differ substantially from state to state. New York claimed the highest costs for title insurance, an average of $1,451. North Carolina had the cheapest title insurance, at $439, followed by Wyoming, at $461. The national average was $756.

“Title insurance — why does it cost more here? It’s kind of hard to say,” says Rafael Castellanos, managing partner of Expert Title Insurance Agency, in New York City. His guesses include: Property is expensive in New York, the city is densely populated and homes are bought and sold frequently. All of these factors can increase a title insurer’s risk.

In Wyoming, land is wide-open, Castellanos surmises. There are fewer transactions and less opportunity for fraud. Buyers, sellers and lenders are more likely to know one another. Contrast that to Miami-Dade County, Fla., where mortgage fraud is rampant and, not coincidentally, title insurance is costly.

“And some states simply represent greater risks associated with doing business there,” says James Maher, executive vice president of the American Land Title Association, the lobbying arm of the title insurance industry. Some states, such as Arkansas and Mississippi, have a regulatory or judicial climate that’s not friendly to title insurers. Other states are riskier because of their real-estate laws or customs.

There are other reasons for price variations, Maher adds. Some places have “all-inclusive” title insurance, where the price includes not only the insurance premium, but other services such as title search, examination of title, closing and other settlement services. Other places are called “risk-only” jurisdictions, where the insurance premium is itemized separately from related services.

The bottom line is that lenders don’t control the cost of title insurance. Nor do lenders set the prices of other services provided by third parties: appraisal, attorney or settlement fees, credit reports, inspections and title searches.

Evaluating third-party fees

Some third-party fees, such as those for appraisals and credit reports, don’t vary much from state to state. But you can find big state-to-state differences in attorney, closing and settlement fees. These cover the costs of the closing the transaction, whether the signature-filled ritual is overseen by a real estate agent, title agent, escrow officer or a gaggle of lawyers. Closings are handled differently from state to state and sometimes within states.

For example, in Southern California, the process of drawing up the title and deed transfer documents starts as soon as both sides sign the purchase contract. In Northern California, that process doesn’t start until the lender approves the loan, says Carolyn Marcial, chairwoman of national affairs for the California Escrow Association.

She adds that, generally speaking, the custom in Southern California is for the seller to pay for the owner’s title insurance policy. But for Northern California, she has to consult a chart. In some counties the seller pays, and in some counties the buyer pays. In Florida, there is a similar discrepancy.

Escrow closings vs. attorney closings

Where California and low-cost Wyoming have escrow closings, high-cost New York has attorney closings. Attorneys for the buyer’s mortgage lender, the title company, the buyer and the seller are present. Sometimes an attorney for the seller’s mortgage lender is there, too. “You can have a lot of people sitting at that closing table,” says Neil Garfinkel, a partner with Abrams Garfinkel Margolis Bergson law firm in New York City.

In an attorney-closing state, all the interested parties meet at the closing. They sign documents and hand over a check.

With escrow closings, the purchase money is deposited into an account controlled by a third party, and when all the documents are signed, the money is transferred to the seller. The buyer, seller and lender don’t necessarily have to gather in one room at the same time. The system tends to be less costly, but that’s not always the case.

As for the origination charges that lenders control — fees for administration, application, document preparation, processing, tax service and underwriting, for example — a savvy loan shopper can find big differences among lenders in one state. But if you pick one national lender and compare its fees from state to state, you find that they don’t differ much.

This is where you need to make your own decision about which sort of lender you prefer. Use the information we’ve provided to further your home loan knowledge and relate it to what you already know about Florida home loans. Good luck.