Buying a home is an exciting time whether you're a first-time homebuyer or a multi-home veteran. Visions of making a new home your own, entertaining friends and family, and making memories there are the best part of starting the home-buying process.
That said, even seasoned home buyers overlook many steps to buying a home. This is most likely because:
- Steps to buying a home change as technology improves
- People often forget their previous transaction as the average person owns their home for 13 years*
- The pathway to buying a home can vary by state or municipality
We help thousands of people search homes for sale and find they're ideal house, so we're breaking down everything you need to know to buy your next home like a pro.
Step 1: Prepare Yourself Financially
To start the home-buying process, you'll want to make sure your financial situation is in order. This means keeping a few different areas of your personal situation in mind.
Credit Score
For a conventional loan, you'll probably need a credit score of at least 620**. You can also go with a government-insured loan program to buy a home, such as an FHA loan which would require a credit score of 580. These ranges can move, but this gives you a good ballpark to shoot for while you're getting prepared for homeownership.
This is a good time to look over your credit reports, which most people don't often do. If there are any dings or negative marks, you can address these ahead of time and improve your score and chances of getting a great loan for your home.
Down Payment
A good rule of thumb is to save up a 20% downpayment for your house. Depending on your financial situation, you can probably put down as little as 3%, but putting down 20% of the purchase price leads to a few benefits that will benefit you in the long run.
- No PMI (Private Mortgage Insurance)
- Lower Interest Rates
- More Home Equity
- Lower Monthly Payments
- Stronger Negotiation Power
There are, however, some obvious downsides to a larger downpayment when buying a home. It will take longer to save up, and could mean you'll have less savings available if you need that money after closing.
Since real estate is not very liquid - meaning you can't sell it quickly like stocks or crypto - that money will likely be tied up while you own the home.
Employment
Most residential lenders will ask for two years of employment in the form of tax returns. This doesn't mean you need to be with the same employer, but the employment history needs to be consistent and within the same field.
For example, if you're a nurse who's moving for a new job and want to buy a home in the city you're newly employed, this should be fine as long as there isn't a long break in employment and you're still in the same line of work.
Closing Costs
These can vary quite a bit when you're buying a home, but most lenders will estimate closing costs to be around 2% of the purchase price of your new home. So if you're buying a $400,000 home, plan on saving up around $8,000.
Some of these are negotiable when making an offer on a home, but this could make you look less appealing to sellers on the other side of the deal.
Step 2: Talk to a Mortgage Professional
The next step in buying a home is getting pre-approved for a mortgage, unless you plan to pay with cash. Getting pre-approved is a crucial step in buying a home in Florida, and it will achieve two important things:
- Indicate how much of a loan you can afford.
- Strengthens your offers so sellers know you are serious about buying a home.
This can be confusing to new homeowners trying to buy a home, but the process is actually fairly simple. Going through this process doesn't fully approve you for a loan, but the lender verifies some of your finances and gives you a "pre-approval" that tells you how much you can spend when you're buying a new home.
Sellers will prefer someone who has gone to the lengths to get a pre-approval since they can rest assured that that person will be able to get the purchase funds come closing day.
Another thing to keep in mind is that a pre-approval doesn't obligate you to do anything. You don't need to buy a home if you don't find the right one, and you aren't locked in with the lender who pre-approves you.
You'll talk to your lender about some important things to get you ready to buy a home:
- Prevailing Interest Rates
- Your Income (and your debt-to-income ratio)
- Loan Programs Available (and down payments required)
- Your Assets
- Estimates for Closing Costs & Payments
During this time, you'll probably need to give the lender your W2s (or 1099), bank statements, and documentation for any assets you have. They'll also run your credit to make sure you can satisfy their requirements - good thing you're a step ahead of them!
Finding the right mortgage lender to help in the process of buying a home in Florida might seem simple, but you want to make sure you're working with an expert. Talk to a few different providers and see who you're most comfortable with and who seems most knowledgable about the best options available to you to buy a home.
Step 3: Find a Great Real Estate Agent
Assuming you know what area you are searching in, you'll want to find a tenacious real estate agent to help you buy a home in Florida that perfectly fits your needs. Any real estate agent can open a door and show you a home, but you'll want someone who takes time to understand you, your needs, and your situation.
Getting referrals from friends and family is a good way to start, but you'll want to interview those you find on your own as well. Anyone you ask will have an aunt, brother, or fifth-cousin-twice-removed who has a real estate license, but you want someone who is a real go-getter to help you buy a home.
You may be asking: "Do I really need a real estate when I'm trying to buy a home in Florida?" The answer is yes, and that's why nearly 90% of home buyers use a Realtor***.
Having someone on your side who has specific local knowledge is invaluable, and when the time comes to move from "Under Contract" to "Closed!" a great real estate agent can save you a lot of time, money, and more importantly, stress. If you're buying a home in Florida, hiring the right real estate agent can be one of the most important decisions you'll make.
Step 4: Start your Home Search
Both you and your real estate agent can search homes for sale and come up with a list of the best houses that fit your criteria. Your agent will know important details that might not be apparent from the listing. For example, you might love a home that's actually in a 55+ community or is in a flood zone.
Identifying a home you love is the beginning of a long pathway towards homeownership. Your real estate agent should be an expert when is comes to buying a home in Florida, and they should be able to set expectations from day one so you know exactly what to expect.
When you're browsing homes for sale, send any good prospects to your agent. They can do the legwork in finding out if the home has any defects, offers, or additional information that you should know about.
Many people look at big third-party websites, like Zillow and Trulia, when they're buying a home. These sites can be great, but always take them with a grain of salt and run the results by your real estate agent. Sometimes, these can show outdated, incorrect, or outright fake information.
Step 5: Negotiate a Fantastic Offer
Once you've found a home you can see yourself living in, the next step is making a strong offer. Depending on how motivated you are to buy the home, here are some tips to make the most attractive offer possible.
1. Put Down Generous Earnest Money
Having skin in the game when you buy a house is always important. Not only does it show you are serious about buying the home, but it shows you have financial strength to tie up funds for a prolonged period of time.
The average escrow deposit is between 1 and 3 percent of the purchase price ($5,000 to $15,000 on a $500,000 home purchase). If you want to stand out, go to the higher end of that range or even exceed it.
The earnest money, or escrow deposit, protects the seller should you default on the contract. However, if you back out during your inspection period or the contract contingencies don't hold up, you should get those funds returned to you.
2. Keep Inspection Periods Short
When you're buying a home in Florida, your inspection period gives you a set timeframe to perform your due diligence to decide if you'd like to move forward with the purchase, renegotiate, or cancel. To a seller, a longer inspection period could look more unattractive.
The contract default in Florida is probably 15 days, so shoot for somewhere between 5 and 10 days to be more aggressive. Home inspections can be done quickly, and you can work with the seller to extend this timeframe if there are more inspections or negotiations that need to be done.
3. Write a Personal Letter
Tug at the seller's heart strings by writing an emotive letter. Tell them what you love about the home, how you envision yourself there, and why your offer should be accepted to buy the home.
Many sellers want to pass their home off to someone who will love it as much as they did. If there are 10 offers on the table, all with similar terms, a note like this could be the deal breaker.
4. Ask About The Seller's Preferences
Many people buying a home fail to put themselves in the shoes of the seller. Buyers often assume quick closings are preferable, but that's not always the case with every seller.
Does the seller prefer any title company or local lender? Working with prominent professionals that the seller can trust could give you a leg up on the competition.
Understanding the seller's motivations when you're buying a home in Florida is paramount to making the best offer possible.
5. Understand the Comparable Sales
Your real estate agent should be able to compile recently sold homes to give you a good idea of what the home is worth and a range of what a fair offer price would be.
While you don't want to overpay for the house, you certainly don't want your offer to be a lowball price that risks offending the sellers or causing them not to take you seriously.
Understanding a fair market value when you're buying a home in Florida allows you to make an offer strategically and let the seller know exactly why you chose that price.
6. Waive Contingencies
You could waive contingencies when buying a home in Florida, but this does come with drawbacks. Relinquishing your right to contingencies - such as inspections, appraisals, or financing - is attractive to a seller since it gives you one less reason to back out, or cancel, the contract.
This means that if inspection issues arise without an inspection contingency, it would be on your to fix them and absorb that cost. If you didn't have an appraisal contingency, you would have to make up the difference between the appraisal value and purchase price should the former be lower.
You are more prone to defaulting on the contract and losing your escrow deposit should a necessary contingency be removed, so always chat with legal and financial advisors before removing contingencies when buying real estate.
7. Be Flexible
Let the seller know that you can adapt to their needs. When you're buying a home, a lot of surprises and unforeseen circumstances can arise. Make sure the seller knows that your offer can be modified so the deal is a win-win for all parties involved.
Step 6: Home Inspection, Appraisal, and More
You're offer has been accepted - awesome! Now what?
Fortunately, you didn't skip Step 3, so you your real estate agent should be able to set expectations up front for what needs to be done before you close on your new home. This should look like a calendar or timeline of things that will be done.
If you're going to buy a home in Florida, these are the typical steps and contingencies to keep in mind.
Escrow
First, you'll probably need to open escrow by making a "Good Faith" deposit. Depending on the contract, you'll likely have up to 3 days to do this with the title company or escrow agent.
The escrow deposit is held by the escrow agent (who is usually the title company) and is not removed without both the buyer and seller's written consent. At closing, the escrow deposit is credited to the buyer in the settlement statement.
Home Inspection
Your Inspection Period will typically make up the 5 to 15 days of being under contract. During this time, you'll want to decide which inspections you'll need to get done when buying your home.
Talk to your real estate agent and inspector about what reports you will need or what they will cost. You'll want a variety of inspections for overall evaluation, property insurance, and to assess unique systems such as septic tanks and pools.
Before your Inspection Period is over, you may be able to cancel or renegotiate terms of your offer if the reports are unsatisfactory. While many issues on inspection reports are minor, talk to licensed professionals and your Realtor about the best options to move forward after your inspection.
Appraisal
If you are getting financing to buy a home in Florida, a home appraisal is virtually always involved. An appraiser's job is to give an independent and unbiased value of the home. Even if you are paying cash for your new home, you still might want an appraisal done as a contingency in your offer or to get more information on the property.
When you're financing your real estate purchase, you cannot choose your appraiser. Rather, the home appraiser is randomly assigned to your lender from a pool to increase the independence and neutrality.
If your appraised value comes in lower than the purchase price that you were going to buy your home at, you may need to renegotiate with the seller or come out of pocket for the difference. In this case, talk to your lender and real estate agent to get a plan of how to best address the deficit.
Title Commitment & Survey
One of the most essential and overlooked steps to buying a home in Florida is the title examination performed by the title company handling the transaction. This reviews the chain of title and confirms no cloud on the title such as a defect in the chain of ownership, lien, or judgement.
The title company will also supply a long report, known as a Title Commitment, that discloses any defects, liens, or other burdens that would affect the property's title. You'll then get a title insurance policy, which is will protect you from any clouded title that might arise. For example, if someone claims to have rights to your property, or there are outstanding liens or debts, you'd be protected with title insurance.
Loan Approval
When you're buying a home in Florida, you'll likely have around 5 days to make formal application with your lender and get on the way to loan approval. A buyer will typically have around 30 days to obtain loan approval, but this can vary widely depending on your lender and personal situation. During this time, you'll have various paperwork and documentation to go over with your financing professional.
Next step in buying a home is having the underwriters review and sign off on your final approval. They'll do this after the appraisal and making sure any loan conditions are met. Then, you'll get a Closing Disclosure to buy your new home which itemizes all of the loan information, closing costs, and prepaid expenses.
Important note: once you have received your Closing Disclosure, federal guidelines give a mandatory 3-day "cooling off" period before closing so you can review all documentation.*****
Step 7: Prepare for Closing
Getting ready for closing on your new Florida home is simple as long as you have your checklist ready. Here some things to keep in mind before you get ready to sign off and buy your home.
Schedule Utilities
The last thing you want to do when buying a new home in Florida is to walk in an realize your electricity is off. Make sure you contact all service providers to get water, electricity, gas (if applicable), and internet transferred on the closing date.
Final Walk-through
In the days before closing on your new Florida home, or possibly the day of closing, you'll want to take one last walk through it. This is your opportunity to make sure the home you're buying is in the same shape as when you contracted to purchase it.
Double-check there aren't any damages from the seller moving out and that all included appliances are still there. Other than that, this is typically a very smooth part of the process that allows you to visualize your new home before buying it.
Send Closing Funds
At least a day before closing, you should wire the needed funds to the title company handling the settlement, This will make purchasing a home in Florida much easier, so you can simply go in, sign, and get the keys to your new house.
Don't Change Credit, Finances or Employment
The last thing you want to do when preparing to buy a home in Florida is make a decision that could be detrimental to your financing.
Stay at your current job until you officially close and own your new home. Some lenders will do a verification on the day of closing before you buy the home.
Don't make any decisions that could affect your credit report. This includes opening new lines of credit, financing new furniture, or even using your credit cards at all.
The most seemingly insignificant purchases could have a massive effect on your financial standing from the lender's point of view. Wait until after you buy your Florida home and then you can resume your spending as normal.
Step 8: Closing: Buy your Home
Congratulations! You've made the long journey of buying a home in Florida, but you're not finished just yet. You're prepared for closing, so what should you expect on the big day?
Fortunately, by this time nearly everything has been done, so rest easy and get ready to celebrate buying a home. These tips will make buying your Florida home much more seamless.
- Bring two forms of identification. One should be a state-issued ID (driver's license, passport, etc.) and the other a secondary form (debit card, insurance card, etc.).
- Bring your checkbook. Sometimes minor errors or last minute charges occur that you don't want to hold you up from buying your home.
- Arrive at closing early. Most home closings will take about 30 minutes to an hour, so arrive early to ensure you have time to ask questions as you go through, or finish, the process.
The seller will sign the deed and associated documents, and you as the buyer will sign closing and loan documents including a promissory note, Closing Disclosure, and deed. The attorney or title company will review all documents, and the lender will provide funding for the real estate purchase.
Finally, the seller will get their proceeds from the home sale, you will get the keys, and the title company will record the deed with the county to officially transfer ownership of the home. You have gone through the wonderful process of purchasing a Florida home!
If this ultimate guide to buying a home in Florida was helpful to you, we would be humbled if you would share it, link to it, and spread the word. The Treasure Coast MLS Search helps thousands of people search homes for sale in Florida and find the perfect home. We provide real-time MLS listings updated every 5 minutes, simplifying the process of buying a home in Florida. If you have any questions or thoughts about buying real estate in Florida, we are always just a call or email away.
Bibliography/Sources
* NAR: How long do homeowners stay in their homes?
** Nerd Wallet: Conventional Loan Requirements for 2022
*** NAR: Quick Real Estate Statistics
**** Rocket Mortgage: Earnest Money
***** Consumer Finance: TRID Rule
Treasure Coast Real Estate: Ocean Cove
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