Many buyers ask what they should expect in regards to USDA Rural Housing closing costs, who pays what portion? etc. It’s important to remember each state can be different in regards to government related fees. Buyers need to understand that many different parties are involved in a real estate transaction. As a result, many of the closing costs are not related directly to the lender. In Florida, lenders will customary charge a underwriting and processing fee, that should be about it. All the other costs are related escrow reserves and third parties like –
Government recording, intangible taxes, Document stamps.
USDA 2.75% funding fee ( as of 2016)
Title and closing fees – Title Insurance, Title endorsements.
Escrow reserves for taxes and 1 year home insurance.
General rule of thumb is all the closing cost AND prepaid escrows will be about 2.5% – 6% of the purchase price. The higher the sales price, the less percentage of closing costs would be needed. The reason for this is many of the closing costs are fixed, and the price stays the same regardless of the home purchase price. Example – the appraisal charge will costs about $450.00 regardless if the home purchase price $65,000 or $200,000. Ditto for the lender underwriting fee, it will stay the same regardless of the home purchase price. There are other closing cost fees like this.
In Florida the home buyer will pay “customary” closing costs and the seller will also have their “customary” closing costs that they pay. However, none of this is set in stone, who pays what closing cost is totally negotiable on the purchase contract. One great benefit of the USDA loan is the program is still 100% financing and does not require any down payment. In addition, the USDA Rural Development loan allow the home seller to pay all the buyers customary closing costs and prepaids escrows – up to 6% of the purchase price. This is great because many buyers can structure their purchase contract in a way where they put very little to $0 into the transaction.
Keep in mind all of the above is regards to a USDA purchase loan. The USDA Refinance Closing Costs are often times less because the USDA refinance is more streamline and may not require a new appraisal and survey. Also keep in mind that some lenders /banks may advertise “no closing costs” mortgages. Although this may appear to be a great deal on the surface, most the time the lenders are just increasing the borrowers interest rate to cover the closing costs. There is nothing “unique” about doing a no closing costs loan, pretty much any lender can provide this option to a loan applicant if requested.
Read more about Typical USDA Loan Closing Costs here and other USDA RD Loan FAQ’s here. Please reach out to us if you have any questions about getting started on your Florida USDA loan pre-approval, we want to help! You can call ph: 800-743-7556 or just fill out the short information request form here. We are open 7 days week 9am-8pm.