The Property Chef's Buyer's Guide
DECIDING TO BUY
Purchasing a home is probably the biggest financial decision you will ever make. Whether this is your first purchase or you are moving on to a different home that better meets your needs, this decision must be made carefully.
1.1 Why Do You Want To Buy? Are you tired of paying rent? Have you outgrown your current home? Would you like a larger yard? Would you rather live in a different area? Do you want to shorten your commute? Identify your “needs” as well as your “wants” in a new home. Having a clear sense of your reasons for buying will help you choose the right home.
1.2 Has Your Income Grown? Home ownership can be a very good investment. As you pay down the principal part of your loan, you are building equity over time in addition to any market appreciation on your property.
1.3 Can You Afford To Buy? Experts recommend spending between 33-40% of your income on housing. The tax benefits of home ownership can provide a considerable advantage over renting. You’ll need a pre-approval letter from a lender or mortgage broker in order to know how much you are qualified for, and this letter is also necessary to submit with any offer you make.
Before you start shopping for your dream home, it’s a good idea to make some preparations:
2.1 Build Your ‘Green File’. A green file contains all your important financial documents. You’ll need it to secure financing for your home. The typical green file should contain:
- Financial statements
- Bank accounts
- Credit card
- Auto loans
- Recent pay stubs
- Tax returns for two years
2.2 Check Your Credit Rating. Your credit score will have a huge impact on what type of home you can buy, and at what price. Anything above 680 is considered good. A premium interest rate may mean a lower interest rate on your mortgage. Check your credit rating with a credit reporting agency such as Equifax, Experian or Trans Union.
2.3 Be Careful With Your Finances. Now is not a good time to make sudden career changes or large purchases. You want to approach home buying from a position of financial stability.
CHOOSING A REAL ESTATE AGENT
3.1 Buying a Home. This process requires making many important financial decisions, understanding complex issues and completing a lot of paperwork. It helps to have an expert in your corner when undertaking such a large purchase. A good Real Estate agent can guide you through the process, and also can get you access to listings before they hit the general market.
3.2 Choosing an Agent. Here are some factors to consider when choosing a real estate agent.
- Ask how much time the agent will have for you.
- Ask about their credentials and education: A good agent will continually strive to improve and gain knowledge of the latest real estate trends.
- Does the agent return your calls promptly? Time is money when attempting to buy a home.
- Choose an agent who listens attentively to your needs and concerns. Pick an agent with whom you feel comfortable.
GO SHOPPINGOnce you’ve got those preparations out of the way, it’s time to find the home of your dreams.
4.1 Take a Drive. Get to know the neighborhoods you are interested in. Drive around and get a feel for what it would be like to live in the area. Start getting a sense of the homes available in those neighborhoods.
4.2 Narrow Your Search. Select a few homes that interest you the most and have your real estate agent make appointments to visit them. Ask your real estate agent about the potential long term re-sale value of the homes you are considering.
4.3 Insurance. Here are some things that insurance agents take into consideration-the age of the home, style of roof(hip roof is best), how close the home is to a natural body of water or fire hydrant, how the roof is tied on, if the home has hurricane shutters or impact resistant glass, if the home has a Miami-Dade rated garage door, if the home is frame or block. These are just a few of the criteria they use to give an insurance quote.
Another thing that’s important to look at when talking insurance is the MySafeFLoridaHome.com program. It’s important to have a wind mitigation report done on the home. This usually costs around $150 and some home inspectors include it in the home inspection for free.
Then you have flood insurance. The only way to determine the amount of the insurance is to have an elevation certificate. This would show the elevation of the home and what flood zone the home is in (if any). If the previous owner had home owners insurance and had a mortgage they probably have an elevation certificate. We always recommend getting flood insurance even if your home is not in a flood zone. If it’s not in a flood zone, the price will be much cheaper for the insurance.
4.4 Time to Buy. Once you’ve picked out the house you want to buy, your real estate agent can help you make an offer that the seller will accept. A good agent will investigate the potential costs of maintenance and repairs on the house.
ESCROW, INSPECTION, & APPRAISAL
5.1 Title Company and Escrow Holder. The title company will research the complete recorded history of the property, to insure that the title is free and clear of encumbrances by the date of closing and that all new encumbrances are properly added to the title. Some properties are subject to restrictions which limit various activities from building to parking restrictions. There may be recorded easements and encroachments, where others have limited rights to use your property.
5.2 How to Hold Title. You may wish to consult with an attorney or tax advisor on the best way to hold title. Different methods of holding title have different legal, estate and tax implications, especially when selling or upon death of the title holder.
5.3 Inspections. Once your offer is accepted by the seller, you’ll need to have professional inspectors evaluate your home’s major systems. Your agent may recommend other inspections, such as roof, chimney/fireplace, property boundary survey, well, septic, pool/spa, arborist or mold.
5.4 Appraisal and Lending. Keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. The lender will often send an appraiser out to the property and you may pay a fee for this service. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, and recent sales of comparable properties. When you are within two weeks of closing, double check with your lender to be sure the loan will go through smoothly and on time.
The hard part is behind you, but there are a few more steps before you can move in to your new dream home.
6.1 Final Inspection. A few days before you take over the property, we’ll do one last inspection to make sure everything is in order.
6.2 Utilities and Services. You will have to change the utilities and services of the house over to your name. Your real estate agent will assist in this process.
6.3 Closing Escrow. When your transaction is nearly completed, the title company will provide you with a “closing statement” that details all of the financial details of your home purchase. We will go over this with you to ensure its accuracy. At the last step in the buying process, the title company will have you sign the final documents, including loan documents (“deeds of trust”). When everything is complete, the title company will record the transaction for you at the County Assessor’s Office, and you will become the official new owner.