Buying a house in Florida is more straightforward than you might think. The entire Florida home buying process can be summarized in a few simple steps. Click on the sections below for more information on each step of the purchase process in Florida.
Thinking of buying in Florida? Estimate your closing costs with Hauseit’s Miami Buyer Closing Cost Calculator, and consider requesting a Hauseit Buyer Closing Credit to reduce your closing costs.
Steps to Buying a House in Florida:
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It’s important to know how much you can afford to spend before you start looking at houses. Home affordability is determined by your debt-to-income ratio along with the amount of savings you have.
The debt-to-income ratio (DTI) is the percentage of your monthly income which goes towards your mortgage payment, property taxes as well as debt servicing payments relative to your income. Compute your DTI using this calculator.
Debt servicing payments consist of any recurring monthly payment which is based on a balance that appears on your credit report. Examples includes car payments, student loan payments and mortgage payments on other properties.
Most banks will lend up to a maximum debt-to-income ratio of 43%. This means that no more than 43% of your income can go towards carrying costs and debt payments.
How much home you can afford is also determined by the amount of savings you have. You’ll need to cover your down payment as well as closing costs. The typical down payment is 10% to 20%. Buyer closing costs in Florida range from 2% to 5% if you’re financing and 1% to 2% if you’re paying all-cash.
You also need to determine how much you feel comfortable spending, both in terms of the upfront cash outlay for your down payment and buyer closing costs as well as recurring monthly expenses such as your mortgage and property taxes.
Just because you can swing a home at the top of your budget doesn’t mean you’ll feel comfortable doing so.
For example, if you work in a cutthroat industry such as finance which is prone to frequent layoffs, you might not feel comfortable with a maxed out debt-to-income ratio and very little savings post-closing. As a result, you may prefer to buy a home which is priced significantly below your maximum budget.
Get a Mortgage Pre-Approval
It’s a good idea to get pre-approved for a mortgage before you start looking at houses. Conversing with a mortgage professional will provide you with the most realistic assessment of your budget.
Moreover, a pre-approval is typically required when submitting an offer in Florida.
The pre-approval process itself consists of reviewing your credit score, income, debt, and assets to determine the maximum loan size you qualify for.
Once the lender has determined the maximum loan amount, they will issue you a pre-approval. The pre-approval letter states the maximum amount they are willing to lend and the terms of the loan such as the interest rate.
It is important to note that a mortgage pre-approval is not a guarantee of approval for a mortgage loan, as the lender will still need to review the borrower’s final loan application and the property being purchased before making a final decision.
The pre-approval process typically takes a few days. Most pre-approval letters are valid for up to 90 days.
The best listings usually sell quickly even in slow markets. The last thing you want is to miss out on your dream home because you’re waiting on a pre-approval letter. If you’re financing, no seller will take your offer seriously without a pre-approval letter.
Identify a Neighborhood
We recommend coming up with a short list of suitable neighborhoods prior to seriously beginning your home search. Consider doing an informal online search and walking around prospective neighborhoods in the months prior to getting serious.
There are many factors to consider when looking for a neighborhood to buy a home in. Some things to think about include:
Location: Consider factors such as proximity to work, schools and places where you like to spend time.
Affordability: Evaluate pricing across neighborhoods to identify areas of relative value which work for your finances and lifestyle.
Amenities: What neighborhoods offer amenities that suit your lifestyle? Consider things such as parks and public venues.
Schools: If you have children, or plan to in the future, you may want to consider the quality of the local schools.
Lifestyle: Think about the type of community you want to live in. Do you want to live in a smaller home closer to the center of the action, or are you comfortable living further out?
Future Appreciation: What neighborhoods are most likely to appreciate over time? Consider proximity to the city center, airports, employment prospects as well as supply and demand dynamics.
Choose a Buyer’s Agent
Working with an experienced buyer’s agent can save you money and help you avoid common pitfalls during the purchase process. Sellers typically pay all real estate commissions, including the percentage paid to the buyer’s agent.
Be sure to work with a buyer’s agent who offers a buyer agent commission rebate. A buyer’s agent who agrees to offer you a rebate will give you back a portion of the commission paid to them by the seller. This is a great way to reduce your closing costs.
The typical duties of a buyer’s agent include the following:
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Identifying suitable homes which meet your search parameters
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Arranging viewings and obtaining answers to questions about homes of interest
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Running comps, submitting offers and negotiating
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Reviewing the inspection report and re-negotiating with the seller as needed
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Making introductions to lenders, inspectors and escrow companies
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Providing support and guidance throughout the buying process, from start to finish
A Full Service Listing for 1%
Sell your home with a traditional full service listing for just one percent commission.
Start Looking at Homes
Begin your home search by perusing real estate websites such as Zillow or your buyer agent’s website. Keep in mind that the vast majority of listings are syndicated to a standard set of websites via the local Multiple Listing Service. This means that the same listings usually appear on all websites.
We recommend attending as many open houses as possible. Open houses are less formal than private showings, so you’ll be able to see more. Viewing as many homes as possible will give you a sense of the market and relative value.
This will help you narrow down your search faster. Open houses typically have a sign-in sheet where you can indicate the name of your buyer’s agent.
Submit Offers and Negotiate
Once you find a house you want to buy, your real estate agent will help you craft an offer.
Home buyers in Florida typically submit an offer by filling out a standard template contract with the proposed offer terms, signing the contract and sending it to the listing agent along with proof of funds and a pre-approval letter if you’re financing. This is usually handled by a buyer’s agent.
A seller who wishes to accept your offer simply countersigns the contract, at which point the property is officially under contract. You’ll then make a contract deposit according to the terms outlined in the contract.
If the seller wants to negotiate, they’ll either send back a revised contract with the proposed terms or convey a counteroffer more informally via email.
Florida contracts typically have an inspection period of up to 15 days during which you may cancel for any reason and receive a refund of the contract deposit. The length of this cancellation period is negotiable.
Get a Home Inspection
You’ll typically conduct a home inspection upon going into contract. The inspection consists of a comprehensive examination of the home’s condition, including the structure, electrical, plumbing, roof, heating, and cooling systems.
The inspection report will highlight any potential issues that may need to be addressed.
At this stage, you or your buyer’s agent can discuss key deficiencies with the seller. The seller may agree to fix some or all of the items and/or agree to a price adjustment.
If the inspection report or the seller’s response is unsatisfactory, you may cancel and recover your contract deposit provided you’re still within the inspection period outlined in the contract.
Apply for a Mortgage
Once the contract is fully executed and the cancellation period has elapsed, you can submit the loan application.
Lenders typically require an appraisal as well as a survey as part of the underwriting process. You will also need to secure a homeowner’s insurance policy at some point prior to closing.
A Full Service Listing for 1%
Sell your home with a traditional full service listing for just one percent commission.
Close on Your Home
Several things must take place before you’re ready to close. These include:
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Receive a commitment letter from your lender
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Complete title examination and receive a title commitment
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Get a home insurance policy
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Review the closing disclosure from your lender
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Conduct a final walkthrough inspection of the property prior to closing
Once all parties are satisfied and ready to proceed with the closing, the closing coordinator will gather all the necessary documents such as the deed, the bill of sale, various affidavits, the FIRPTA certificate as well as the closing statement.
If the buyer is financing, the buyer’s lender will submit its own set of closing instructions to the closing attorney so its various fees, charges and escrows can be reflected on the closing statement.
On closing day, the closing coordinator will make sure the various parties sign the correct documents, ensure all the relevant parties that need to be paid are paid and verify that the right documents are sent to the county to be recorded in public records.
