When you think you know that you are finally ready to take a big step of buying a home in Florida, make sure that you have all the boxes ticked before you reach the point where there is no turning back. It is very easy to get lost in all the diversity that the real estate market of the Sunshine State has to offer, but an even bigger threat lies in the high demand for property here which creates even higher risks for you as an inexperienced buyer.
Follow our easy step-by-step guide in order to avoid all the pitfalls and to make sure you are entering the game well-prepared and with no rose-colored glasses, because in the end, your goal is to get to the last move-in and enjoying-yourself stages without unnecessary delays and aggravating mistakes.
Step 1: Determine how much you can actually spend on the home without making serious sacrifices.
The majority of banks will expect your monthly costs not to exceed a certain percentage of your income.
Another important factor apart from your income is your debts. If you have current or recurring debts that you have to pay monthly, the picture should show that your new payments on the mortgage together with pre-existing debts do not exceed a certain threshold, for example, 43%.
Yes, there is also a down payment. If you are ready to make a 20% down payment and have no problem with taking a moderate amount of loans, many lenders recommend home buyers to look for homes that don’t cost more than three to five times more than their annual household income.
Other key points that you need to address in your calculations should include the following:
- Your monthly expenditures.
- Other annual homeownership expenses. These are normally listed as ‘HOA’ in property descriptions and include common area maintenance, exterior building maintenance, limited insurance, sewer, roof maintenance, and termite. The list varies from property to property and sometimes can cover other items, such as trash pickup, water and cable, and so on, so don’t forget to check each time.
However, one of the greatest perks of living in Florida is the fact that there is no property tax, so cross that out of your calculations.
Also note that the smaller the down payment is, the more likely is the chance that you will have to pay mortgage insurance, while your loan application will be subject to greater scrutiny.
Step2: Check your credit score and get preapproval and prequalification for your mortgage.
First of all, every first-time home buyer needs a good credit score. A credit score is a three-digit assessment of your credit report, it is a detailed document that shows how well you have previously dealt with student loans, credit card, and other past debts. Late payments on your record will, unfortunately, decrease the chances of the lender’s approval of a loan with a good interest rate for you. It is very important to keep track of your credit score and get it ready before the big move to make sure nothing is holding you back in this area.
Secondly, it is important to remember that preapproval and prequalification are two different things. Prequalification is a much simpler procedure that gives you a quick estimate of how much you can afford to borrow, but with no promise from the lender. Preapproval is a much safer process since at the end you are guaranteed to be creditworthy to buy a home, but it requires much more patience and attention to detail, and way more paperwork.
One last tip is to make sure you meet with as many lenders as you can, ideally at various mortgage companies. This will help you get differing opinions and a broader overall perspective on your chances.
Step 3: Find a real estate agent
Finding a real estate agent to represent you is the most important decision that you will make on this journey to buying a house, second only to the purchase itself. You don’t have to pay your agent a separate fee, as they are compensated with a commission paid by the seller of the house. An agent is a valuable partner, due to his knowledge of the area and interpersonal skills: trust us, you don’t want to find yourself doing all the sales negotiations by yourself. An agent is a key to the deal because a good one can smooth the process and will make your money worth it, while his less reliable peers are going to cost you not only precious time, but money as well. The most important thing to remember here is that there many factors that make up a trustworthy real estate agent, the main being experience and an ability to put yourself in the client’s place. As soon as you find an agent that has an individual approach, you will know that you are on the right track.
Step 4: Get the home inspected and appraised
A home inspector checks the house’s every corner to make sure there are no problems that require immediate attention such as structural damage, termites, mold, asbestos, and things that need fixing that might make you think twice before closing the deal. The most important goal of this inspection is to give you a chance to renegotiate your offer, as it is conducted only after your offer to the seller has been placed, or even withdraw from the deal without penalty in case the home inspector finds serious material damage.
While home inspection is conducted with your real estate agent’s initiative, a home appraisal is arranged by lenders. The appraiser is a member of a third party company and his job is to provide an independent estimate of the value of the property you are buying. This stage is important as it guarantees that you are paying a fair price for the selected property.
Step 5: Close the deal
The finalization of the deal, also known as settlement or escrow in other states, is referred to as closing in Florida, involves several parties, such as buyer, seller, mortgage representative, and other. The paperwork that you are required to sign at this stage includes the purchase documents together with your loan documents. Give it a couple of days for your loan to be funded after the lender receives all the necessary papers. Once the seller receives the payment you are all set, and it is finally time to pick the wall colors and curtains.