Frequently Asked Questions

Below are some of the most common questions experienced during the loan application process. Please reach out to us should you have any additional concerns not listed here.

What is an appraisal?

An appraisal is the estimated value of a home determined by an inspection of the property and its comparison to recently sold homes in the area to estimate the value. The findings from an appraisal determine the amount a mortgage lender will let you borrow for the property. In a purchase transaction, it protects the buyer from paying more than the house is worth. In both a purchase and a refinance, it prevents the lender from giving the homeowner more money than the home is worth.

What is the difference between an appraisal and a home inspection?

An appraisal is scheduled and required by the lender to determine its value. A home inspection is not required but highly recommended to inform the buyer of potential areas of concern prior to purchasing. A buyer schedules the inspection typically with the assistance of their REALTOR®. Simply put, an appraisal determines the home’s value by using various factors such as the home’s condition and comparable sales whereas a home inspection determines the condition of the home and is performed by the naked eye. Both an appraisal and home inspection are paid prior to closing.

What are closing costs?

Closing costs are fees and expenses you pay when you close on your home, beyond the down payment. These costs can run 3 to 5 percent of the loan amount and may include title fees, lender fees, appraisals, prepaid (property taxes, homeowners insurance, interest) and more. Be sure to talk to your mortgage lender about the specifics for your home purchase.

What is involved in the mortgage process?

What documents are required when applying for a home loan? With your consent, we can pull the majority, if not all of your financial documents electronically making the mortgage process even more simplified for you. However, if you choose to opt out of this option then typically we need your past 2 years of W-2’s, 2 months of paystubs and 2 months of bank statements. This will vary greatly however, depending on employment type, loan type, as well as other factors.

After I find a home what happens next?

After you find a home, it is crucial that you complete the full loan application. Essentially you are converting your pre-approval into a full loan application. In order to comply with the guidelines put forth in the contract be sure to contact your professional as soon as possible.

What is PMI/MIP?

Private Mortgage Insurance (PMI) and Mortgage Insurance Premiums (MIP) both have the same general purpose: to offset the default risk to lenders. Mortgage insurance does not protect buyers; it protects lenders from the potential default of buyers.

PMI is required on conventional loans with less than 20% down payment. PMI is calculated based on several factors: loan amount, down payment amount, debt-to-income ratio, property type, credit score, and term of loan.

MIP is required on FHA loans, a portion of which is upfront and paid at closing and the other portion is paid on a monthly basis. The upfront premium is always 1.75% of the loan amount. If you can’t afford to pay this at closing, it can be financed into your loan amount. In addition to the upfront premium, there’s an annual premium that’s based on your loan type as well as your down payment or equity amount. If you have a standard FHA loan with a 3.5% down payment on a loan of no more than $625,500, the annual MIP is 0.85% broken into monthly payments.

What is the difference between closing costs and a down payment?

Closing costs are an assortment of taxes and fees charged by governmental entities, local municipalities, and administrative groups handling your loan and processing your real estate purchase paperwork. They’re very different from the down payment. The down payment is a percentage of the purchase price required to be paid at closing which goes directly to the principal in turn reducing the amount of money you are borrowing. The down payment required can vary depending on various factors such as the loan type.

What is the first step in buying a home?

The first step in buying a home is getting pre-approved. It is a necessary step because it informs you of your Buying Power based on your specific circumstances. A pre-approval consists of completing an application either online, in person, or over the phone where your income, assets, and other vital information is gathered. Your credit is also pulled in determining your overall Buying Power.

In today’s hot market it is vital to have a pre-approval prior to looking at homes as it ensures that you are looking at homes in the right price range for you and also prepares you to make an offer when you find ‘the one’. Enclave’s online pre-approval is simple and takes only about 15 minutes to complete.

What is an escrow/earnest money deposit?

An earnest money deposit (EMD) is essentially ‘skin in the game’. It shows the seller that you are a serious buyer. The money is placed in an escrow account until closing. The deposit is typically due within 3 days of closing and is credited back towards your cash due at closing assuming you are within the specific terms of the purchase and sale contract. Speak with your real estate professional for specifics on EMD and how it can be affected throughout the contract process.

Who pays closing costs?

There are different closing costs for both the buyer and the seller. 

Common Seller Closing Costs:

  • Real Estate Agent Commission
  • Outstanding amounts owed on the property:You’ll be responsible for any unsettled payments on your home that can include HOA fees (homeowner’s association) and utility bills. All of these extraneous costs will be prorated to your closing date.
  • Prorated Property Taxes: Property taxes in Florida are paid in arrears. You will owe property taxes for the portion of the year you owned the house (be it 30 days or 300 days).  These will be prorated based on the number of days you owned the home, so the amount you owe will be much higher for a November closing than one in early January (300 days vs. 30 days). Note: If your current mortgage payment includes an estimated amount for property taxes that they collect and put in escrow”, then each month you should be able to get your escrow balance back after closing.
  • Settlement Fee – typically $350 to $600: While you can avoid attorney fees (Florida doesn’t require an attorney to be present at closing), you will still need to pay a settlement fee to the title company or escrow company for their services on closing day.
  • Title search – $100 to $200:A title search looks into the home’s ownership history to ensure you are the true owner and that the title is clear of any liens or judgements.
  • Municipal Lien Search – $100 to $200: The municipal lien search looks into unrecorded property issues that are not shown in a typical title search, such as code violations, water/sewer/solid waste balances, and open or expired permits, to name a few. The cost varies by municipality.
  • HOA estoppel – typically $200 to $500:This letter certifies how much you owe the HOA. It includes your monthly dues, as well as any special assessments, past dues, fines or other fees. Since the HOA could potentially put a lien on your home for unpaid dues or to enforce violations, the title company must confirm that you are in good standing with the HOA and current on all your dues before they can give clear title on the home.
  • Documentary Stamps on the Deed – varies with price of the home:  Also called a transfer tax”, this tax is paid to your local county when the deed is recorded. In all Florida counties other than Miami-Dade, it is calculated at $0.70 per $100 (or portion thereof) paid for the property. For a home with the median sales price of $275,000, the document stamps would be $1,925. In Miami-Dade County, the rate is $0.60 for single family homes, with a surcharge for other types of properties. Doc stamps are separate from the mortgage tax and intangible tax paid by the buyer.
  • Title insurance – rate is set by the state and based on the purchase price:Typically the buyer and seller both pay a portion of the title insurance.


Common Buyer Closing Costs:


  • Lender fees
  • Appraisal – $450 to $650:An appraisal determines the value of a home to assure the lender the property is indeed worth the amount they are giving the buyer. The appraisal is often paid by credit card up front and therefore not due at the time of closing.
  • Survey – $350 to $500: Many lenders will require a survey of the property to determine the location of any buildings and the property’s boundaries. Costs typically vary depending on lot size and type of property.
  • Credit report – $25 to $75:This fee covers the cost for the lender to pull the buyer’s credit history and credit score.
  • Home inspection – $250 to $600:Conducted before closing, a home inspection will reveal any major issues with a home such as structural or foundational damage. Costs vary by company and city.
  • Recording Fees – varies by county:This fee covers the cost of registering the sale and transfer of your property. Once the deed of transfer is recorded, it will become part of the public record.
  • Transfer Taxes – varies with amount of the mortgage:Just as the seller typically pays for the document stamps on the deed, the buyer typically pays document stamps on the mortgage, as well as the intangible tax for the mortgage. These amounts are based on the amount of the mortgage, not the purchase price of the property. The doc stamps are $0.35 per $100 or portion thereof, while the intangible tax is 0.2% of the amount secured.
  • Title insurance – rate is set by the state and based on the purchase price: Typically the buyer and seller both pay a portion of the title insurance. 

What is a home inspection?

A home inspection observes and reports on the condition of a property. A qualified home inspector assesses the condition of the property, including its heating and cooling systems, plumbing, electrical work, water, and sewage, as well as some fire and safety issues. In addition, the home inspector will look for evidence of insect, water, or fire damage or any other issue that may affect the value of the property.

Common types of home inspections: Home Inspection, 4 Point Inspection, Wind Mitigation, WDO (wood destroying organisms)

It is recommended that you seek the advice of your real estate professional to determine if all inspections are necessary.


How much money is needed for closing costs?

Closing cost fees can vary on numerous factors, however a general rule of thumb is approximately 3-5% of the purchase price. 

What are discount points?

Generally, points and lender credits let you make tradeoffs in how you pay for your mortgage and closing costs. Points, also known as discount points, lower your interest rate in exchange for paying an upfront fee, due at closing. Lender credits lower your closing costs in exchange for accepting a higher interest rate. Points equate to a percentage of the loan amount. For example, 1 point is equal to 1% of the loan amount ($100,000 loan: 1 point = $1000)

What is title insurance and why do I need it?

Title insurance is a way to protect yourself from financial loss and related legal expenses in the event there is a defect in title to your property that is covered by the policy. Title insurance is a way to protect what is likely your largest investment—your home. An Owner’s Policy provides peace of mind that your title company will stand behind you if a covered title issue or defect arises after you have bought your

What is a down payment?

Your down payment plays an important role when you’re buying a home. When applying for a mortgage to buy a house, the down payment is your contribution toward the purchase and represents your initial ownership stake in the home. A down payment is a percentage of your home’s purchase price that you pay up front when you close your home loan. Lenders often look at the down payment amount as your investment in the home. The lender provides the rest of the money to buy the property.

There are different down payment requirements depending on your loan type, property type, as well as other various factors. Contact your mortgage professional for additional information.