Guide to Buying a Home in South Florida
Purchasing a home is one of the single most important investments you will make, the focus here is to give you some valuable information and tools to help you understand the fundamental workings of the real estate industry and to make this an exciting, happy event for you. Although some of the materials are directed to home buyers, many of the subjects will also apply to prospective tenants. For many of you, leasing is a short term transition before you buy your dream home.
The wonderful advantage of the internet is that there are so many sources of information. They can help you become much better prepared when you’re ready to begin your search. The more prepared you are and the more knowledgeable you are about the process, the easier and more pleasant the experience will be.
This page is constantly being updated and expanded to provide more information on the mortgage process and options, property taxes and utilities, inspections and insurance, so bookmark and check back with us.
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“Things to Consider When Buying Your Home This Fall”
Outlines some Current Important Market Trends for the Housing and Mortgage Market
Come back to this How to Buy a Home page for more Local information and current details
If you are working with a Realtor she can help familiarize you with the process – walk through the steps, give an overview of all the paperwork that will be required; explain the agency relationships; discuss financing options and give references for lenders (see the next section).
1. How Much House Can I Afford?
The hardest part of the home-buying process is figuring out what is affordable for you even if a bank is willing to lend more.
The lender you select and the preparation of a pre-qualification and pre-approval are very important steps in a smooth transaction. Shopping lenders for the best rates is not generally the best route to take. Rates fluctuate daily. There are many mortgage choices and many options. Underwriting criteria vary with lenders. It is much more important to select a professional who can help you understand the process and obtain the best loan for your situation.
Pre-qualification or pre-approval are beneficial first steps before you even begin to look for your home.
- A pre-qualification means he has reviewed your situation with you, but not necessarily looked at your asset and obligations or run a credit report although it would be more accurate if he did. This is not as good as a pre-approval.
- With a pre-approval your lender enters your information into a Desktop Underwriting (DU) program that approves you based on the information you provided and running a credit report. He has also received and verified your documentation for assets and obligations it’s better if he does because it will be more accurate. It also does not mean the underwriter has approved it.
- Pre-approval will also be pending the qualification of a house, appraisal, inspections and insurance. It puts you in a much stronger position with a seller and you and your realtor are very comfortable about your loan approval and house search. This also does not have underwriter approval.
- Some lenders can also do a full pre-approval that has underwriter approval, so all that is required are the qualification of the house, appraisal and insurance binder. This is the best way to do it because it is almost like a cash purchase.
A lender’s pre-approval is really based on the monthly mortgage payment – including principal and interest, taxes, insurance and HOA (homeowners insurance). He then backs into what house you can afford based on these parameters. These can vary on each individual house and community, so it is good for you to understand how these all work together and determine what you can afford to purchase.
2. Calculators and Worksheets
How Much Can I Afford? section of the Mortgage Finance Center has helpful articles and checklists, a mortgage calculator, and links to other calculators related to home buying and selling.
3. How Real Property Taxes are Calculated in Florida
Property taxes are an important part of your home ownership carrying costs throughout Florida – and Palm Beach county and the Treasure Coast are based on millage rates which are used to calculate your ad valorem taxes. One mil equals $1 for every $1,000 of taxable property value (which is after exemptions if applicable).
The important thing to remember is that a listing sheet states taxes based on the current owner’s taxes and situation. It most likely is not what you will be paying after you purchase. Your taxes will be based on the new value determined by the property assessor’s office and without homestead exemption. You need to purchase by December 31st of the current year to be able to claim the homestead exemption for a primary residence.
Read more details here on How Property Taxes are Calculated on the different alternatives and the rules for Florida and our counties.
The millage rate for Boca Raton is 18.307 per $1,000 of value, so you are paying $18.31 for every $1,000 in taxable value. The county rate is generally 17.7544, so Boca’s rate is slightly higher. Cities are generally a bit higher because they offer several items through the city, whereas if you live in the county, all the taxes are through the county. I will be updating the article for the other counties.
4. Home Search
A good first step is to fully define your goals for this move – determine your needs, locations or areas you prefer, your price range and timing for your move. Take a piece of paper with 2 columns and separate your needs from your wants. These things might change a bit after you get pre-qualified and see what home values are for the property you prefer. No matter what price range people are looking at, I find they have a hard time initially to stay within their budget, they usually like homes that are just a bit above that price range, so it’s good to have that needs vs wants list.
Before deciding which house to buy, think about your lifestyle, your current and anticipated housing needs, and your budget. Finding the right house involves striking a balance between your wish list and the reality of the housing market in the area you wish to live.
To search for properties, here is the link to the Home Search page. You can also view some of the Saved Searches for various Country Clubs in Boca Raton and Delray Beach, and also the Port St Lucie area.
When you go out to look at homes, review them with a notepad or checklist form to help you keep track of the properties and their differences. Limit the number of homes you look at in a day or it will be too much and you won’t be able to remember them. It’s important to talk openly with your realtor on what you like and don’t like and why. This way your realtor will get a better idea of what you’re looking for.
If you see advertised properties of For Sale by Owners (FSBO’s) or new home communities, call your agent to check them out for you. Most properties and new home projects will cooperate with agents, but only if the agent accompanies you on the initial visit and registration.
For new construction, remember, the builder and their sales personnel represent themselves, they have to be ethical but they DO NOT represent you. So it is good to have an agent on your side of the negotiation – there is no difference in the final sales price, you can’t get a better deal or discount without an agent.
When you’ve narrowed down the homes to one or two that you like, your agent can do whatever research is necessary to help you make your decision. Information is available from school districts, local chambers, and planning and zoning offices. Your agent can do a comparative market analysis – a listing of comparable homes in the same area that sold, and those that are currently listed, and how they compare to the homes you have selected.
5. Offer & Negotiation
When you’re ready to make an offer, the final price you’re willing to pay will be based on what it’s worth or it’s fair market value. The value is what other buyers were willing to pay for properties similar to yours in the same neighborhood or area. It is best to have a good idea before you make an offer of what you’re willing to pay and at what terms. Negotiating strategy depends on the situation and parties involved and the current market.
A successfully signed contract is a balance between the parties of sale price and terms that are acceptable to each one. Determine ahead of time what items are important and not negotiable by you and which ones would be. Offers and counteroffers can go back and forth several times. It’s important to focus on your goal or Ultimate Scenario and not get upset or angry at the seller or the negotiations. Focus on the big picture and on what you want to accomplish.
The housing market for 2020 and 2021 through the COVID-19 pandemic has not been your standard offer / negotiation process. There is a shortage of inventory and an increase in buyer demand, rising prices, and multiple offer situations. Review the Real Estate BLOG for more specific market information and tips on how to buy and sell.
6. Clauses & Contingencies
Once the terms are acceptable to both sides and all parties have initialed all the changes, the date of the last signature or initial becomes the effective date of the contract. This effective date is a trigger for many of the time frames in the contract, clauses and contingencies, which are deadlines that must be made. Contingencies can include loan approval, inspections, sale of property, receipt of acceptable condo or homeowners association documents, and many others. Several other items that must be obtained and reviewed are title insurance, survey (including elevation certificate if required), and property insurance (including flood insurance if required).
I like to recommend that all these items be taken care of as early on in the process as possible to avoid the last minute rush prior to closing. If a pre-approval was obtained prior to your home search, there is no need to wait for loan approval before you do them, thereby making it a much less anxious and frustrating process.
7. Closing & Moving
At least 10 – 14 days prior to closing arrange to have utilities transferred to your name as of the closing date. Many companies will require a deposit. Arrange for a mover as soon as possible to obtain competitive rates and reserve the date you want.
The last item prior to closing is the final walk-through inspection. You will be checking to see that all the items the seller agreed to fix or replace have been completed. Secondly, per the contract, all electrical systems, plumbing, appliances, heating and air conditioning need to be in working order at the time of closing.
At closing, you will be required to either bring a cashier’s check from a local bank made out to the title company or send wired funds. Personal checks are not acceptable. If your closing with a loan, the signing of loan documents can seem never-ending. Your title agent and realtor will help you understand everything. Don’t be afraid to ask questions.
As a member of the Multiple Listing Service, I have access to a database that covers from St Lucie and Martin County south to an including Broward and Miami-Dade County. I also have developed my own database of properties that are not listed in the MLS system for new home communities. Together we can select the homes that you would like to see. By setting appointments, you can see these homes in a short period of time and have a clearer idea of what is right for your needs.