BUYING A HOME IN PALMETTO BAY

If you are reading this, then you are possibly ready to purchase a home or condo in Palmetto Bay.  Owning Miami real estate is a smart decision for many reasons.  Palmett Bay is an amazing place to call home, retire, or invest. The decision to purchase real estate is one of the most exciting and overwhelming decisions you will ever make.  Purchasing a home is a huge responsibility that can be better navigated with a trusted professional and a general knowledge of how the buying process works in South Florida. 

Purchasing real estate proves to be a worthy investment time and time again.  Whether you are considering your first purchase, a vacation home, or an additional real estate investment, there is something to be gained financially from the purchase.  When you own real estate, they money you pay towards your mortgage translates to equity which you earn and keep.  

The information and suggestions here are meant to serve as a guide to the homebuying process from start to finish.  Though there are never 2 transactions that are the same, what you will read here is the basic step by step process for all real estate purchases.  For most people, this will be one of the most important financial decisions you will ever make. 

BENEFITS OF OWNERSHIP

People often get so caught up and overwhelmed with the home buying process that they forget to examine all of the benefits of being a homeowner.  Real Estate appreciates in value about 5% every year nation wide.  Of course this number varies slightly depending on the area with some locations see an excess of 20% increases.  Additionally, as it stands now, you are able to deduct the interest paid on your mortgage as well as property taxes. Some neighborhoods in Miami Dade such as South Miami, Coral Gables, Pinecrest and Palmetto Bay have seen home prices rise steadily for several years.

Compared to renting, when you have a loan, the payment stays the same for the life of the loan.  This is of course different if you have an adjustable rate mortgage or a variable rate but your monthly payment is still fixed for a predetermined period of time.  Every Time that you make a payment towards your mortgage a portion of that payment is applied to your principle, and that is how you earn equity in your home along with appreciation.  At the start, it is a slow process because you are paying mostly interest but over time your equity can grow.

TIPS FOR YOUR FIRST HOME PURCHASE

Some of the most important things are to refrain from making any large purchases, leasing a vehicle, applying for additional loans, or applying for new credit cards, or closing existing lines of credit.  Wait until after closing to buy appliances, furniture, or open up that department store credit card.  All of these things will affect negatively your credit score.

If you know that you will be financing your purchase do yourself a favor and get a pre-approval letter from your bank.  Having a realistic idea of what you can afford will make the shopping process much more enjoyable.  Additionally, pre-approval makes your offer on a property more likely to be considered since the seller isn't worried about whether you can afford it or not.  Don't forget about your debt to income ratio.  Your cumulative debt should be no more than 40% of your income and your housing debts should be less than 32%. 

Credit Score Credit Score Credit Score! This 3 digit number is very important when you are going to purchase a home.  It is important that you know your credit score beforehand.  The higher your credit score, the lower your interest rate will be.  If you are thinking of purchasing a new home, consider working on your credit 6 months or longer ahead of your purchase to allow you to take care of any issues that you may not have been aware of.  Little things such as missing or late payments can really affect your score.  Make sure all of your bills are paid on time. 

Please don't leave your job!  A change in career can indicate some form of instability.  For the most part a new job in the same profession is ok for example, a Science teacher changing from one school to another shouldn't raise any flags.  However, if it can be avoided it should be. 

It is a good idea to have your deposits and closing costs in the bank several months prior to submitting your application.  The lender is going to be looking for balance sheets, pay stubs, and things of the like prior to closing.

SELLER'S MARKET VERSUS BUYER'S MARKET

We all hear the terms Buyer’s Market and Seller’s Market.  The meaning of these is simple and can change based on many variables.  Circumstances such as the economy, supply and demand, along with interest rates all play a role.  Interestingly enough it can differ from one neighborhood to the next.  

Simply put, a Buyer’s Market is when then are more homes for sale than there are buyers to purchase them.  Conversely, a Seller’s Market is when there are more buyers than there are homes available. As mentioned before, interest rates are an important consideration. When the rates go up, less people are able to obtain a loan and when the rates are low, more banks are lending to potential buyers. 

WORKING WITH A PALMETTO BAY REALTOR®

A good Realtor® is after more than just commision, they are after the dream of everyone owning their own little piece of the earth. Benefits of working with a realtor are many.  A realtor can assist you with the purchase of a primary residence, the opportunity to build equity for a future purchase, or having an empty nest all require a different approach to get the result you desire. Choosing a full time Realtor will arm you with the professional you need to get the property you want.  

A common misconception among buyers who want to do it on their own is that they will save money if they handle it themselves.  Not only is this incorrect, but a Realtor® simply has access to more information to assist you with the decision. Additionally, when a buyer uses a Realtor®, you pay them nothing.  The seller takes care of the Realtor® fees so essentially, they are working for you for free.  

SEARCHING FOR YOUR DREAM HOME

The search for your dream home usually begins online.  The best place to start is your Realtor's® website like (www.livelovepalmettobay.com) and should include detailed MLS listings organized by area in all the neighborhoods/cities you are looking for.  In addition to listings, a good Palmetto Bay Buyer Real Estate website will include up to date Market Reports to allow you to compare the latest sales in a neighborhood.  Additionally, specific pages showing Motivated Seller listings, Newest Listings, Biggest Price Changes, and a number of other useful property listing features will allow you to easily find your dream home.  If you want to search for homes like a Realtor®, then you should have the same tools easiy accessible in your Realtor's® website.

An effective search is done with an open mind, not only looking for properties in your main area or neighborhood but also nearby neighborhoods.  An experienced Realtor® is knowledgeable about a wide array of areas and is able to take your neighborhood short list and show you additional areas that check off all your boxes and could possibly get you more value for the money.

GETTING PRE-APPROVAL/PRE-QUALIFIED

If you are like most people, you think that these 2 terms mean the same thing.  Simply put, pre-qualification gives you an estimated amount you can afford, and a pre-approval letter means that the lender has given you a full workup, including your credit score, looking at your W-2, bank statements, and check stubs. A pre-approval sends a strong message when you go to make an offer on a home.

The pre-approval process is an important step and often overlooked.  Getting pre-approved is as simple as walking into your local bank.  This is great to do prior to starting your search because this information will let you know what price range you should be looking in.  Additionally, the majority of listing agents only want to work with qualified buyers so being pre-approved makes it much easier to schedule showings to view properties you are interested in.

This step will also introduce you to the type of loan programs available to you.  This matters because certain listings will only accept offers with a particular loan type. There are many loan programs but the most common are Conventional, FHA, and U.S. Department of Veteran’s Affairs or VA. 

Conventional - Conventional Loans are loans that are not backed by any sort of government agency.  Because of this, the down payment required is higher than other loan programs however depending on your credit score, you could be entitled to a great interest rate.

FHA - These loans are guaranteed by the the Federal Housing authority and are the usual choice of first time home buyers.  The government will pay back the lender should you decide to default on the mortgage.  Because of this, most lenders are willing to lend more because their risk is lowered.  Additionally, you may only need a down payment of as little as 3.5%.

VA - This loan is guaranteed by the Department of Veterans Affairs and is open to Veterans, Servicemembers, and not remarried spouses. There is NO down payment required unlike other programs and again, banks are more likely to lend because they are not assuming any risk.

There are more details and programs however this list discusses the most common of them.  It is best to ask your lender how each scenario would play out for you and make your decision based on that.

While there, you can check out the different types mortgages, Fixed Rate Mortgage, Adjustable Rate Mortgage (ARM), and Balloon Mortgage. 

A Fixed Rate is desirable because just like it sounds, the amount you pay is fixed and will not change.  This makes it very easy to budget yourself accordingly.  

Adjustable Rate Mortgage ARM’s usually have a lower interest rate to start and usually allow you to borrow a larger amount.  However, your interest rate and monthly payment will continue to increase based on the market.  

Balloon Mortgages set a specific rate for a certain amount of time.  Once that time is up, 5 or 7 years, the balance or balloon portion of the loan is due.

MAKING AN OFFER

The time has come and you have found a great home. Now what? The first step is to talk to your Realtor® to determine the best approach to submit an offer and a CMA or Comparable Market Analysis needs to be completed. 

Next we need to look at how well the property is maintained in comparison to other homes in the area.  When you look around are your potential neighbors updating their homes? How does your compare and if repairs are needed to keep it along the value of the others how much will that cost?

Your offer will be determined by the market condition of that neighborhood.  If it is a seller’s market and properties are moving quickly you could be in a multiple offer situation which could result in multiple bids which will therefore affect how you should proceed.  The sellers in this type of market will be looking for a strong offer with little to no contingencies.  It is possible for homes to sell above asking price with these conditions.  During a buyer's market, homes are listed for longer periods of time and the sellers are usually more open to negotiations. Buying a home is a huge commitment and your feelings about that home are the most important.  If you have found the home of your dreams, let your agent go out and get it. Below are the steps to the usual course of events for placing an offer.

THE DEPOSIT

A deposit around 10% is the norm however, that is negotiable.  Keep in mind that a solid deposit shows the seller that your offer is serious and they are more likely to entertain your offer with a good deposit. When you submit an offer on a property, will typically agree to one deposit amount and if the offer is accepted you will make an additionally deposit to equal the agreed upon amount by a certain date.  This money is held in escrow which simply means it is being held by the Real Estate Company’s or Title Company's Escrow account and it is delivered to the agent doing the closing on closing day.

DOWNPAYMENT

This is the amount that you will be paying in cash for the property.  If financing is being used, this is the difference between the purchase amount and the loan amount.  A large down payment is liked by lenders and sellers.

CONTINGENCIES

Contingencies sounds like a scary word.  In actuality it simply means that the contract is binding assuming financing, inspection, and or the seller’s disclosure all go according to plan.  If you are financing, the offer is contingent on you obtaining the loan.  If you do not get the loan, the contract will be considered void and the deposits that you made will be credited back to you. Same thing goes for the inspection.  Home inspections are very important and will assess the overall condition of the home.  The inspection is done at the expense of the buyer and can be handled 2 ways. The first option is to have the seller be responsible for any repairs that are needed after the inspection is complete. Additionally, you can purchase the home as is meaning you would be responsible to repair the issues found at inspection.  The latter is the most common and this also gives you some negotiating power when submitting offers.  Of course, the inspection results can allow the buyer and seller to cancel the contract and the deposits will be returned. Another contingency is the seller’s disclosure.  This is a document where the seller gives an overall history of the property.  Age of appliances, roof, state of plumbing, structural issues etc.  Again, this is important when it comes to making your offer as it evidences repairs that may be needed, upon the findings the buyer may cancel the contract.  Numerous other contingencies can be included and your realtor can assist you based on your needs.

CLOSING AGENT

Typically speaking, the buyer chooses the closing agent.  This can be a lawyer, Title agent, or both. This person is responsible for making sure the title is clear of defects.  They will be involved in the transaction from offer acceptance till closing.  They will also assist you in securing title insurance for you and communicating with the lender to come up with the amounts needed on the day of closing. The closing agent will contact you prior to closing and let you know the exact amount that you will bring in on the day of closing. This will include the downpayment and closing costs; your first deposit will be brought in by the realtor.  

CLOSING DAY

The big event is finally here and you are going to close on your home! Prior to doing so you will conduct a walkthrough inspection.  The purpose of this is simply to ensure that the home is in proper condition and that any repairs that needed to be made have been done.  There is no adjustment in price or negotiations that take place.  On closing day, the seller receives a check, the buyer gets the keys and a transfer of title takes place.  Welcome to your new Palmetto Bay home!

Get in Touch
  • Amy Osorno, M.S. , RealtorĀ®
  • Berkshire Hathaway HomeServices EWM Realty
  • (305) 282-1098 Direct
  • 12751 South Dixie Highway Pinecrest, FL 33156
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