Florida Home Buying Tips Part 2

How To Get The Best Deal In Florida Part 2

While there are some price declines at the grocery store, it seems as if everything is getting more expensive, despite all the talk we hear about how inflation is cooling. We recently talked about how the Fed’s policy moves are impacting your money, and dove into the details of the latest inflation (CPI report) to see exactly where consumers are spending more or less for goods and services. But at the end of the day you’ve still got to buy a home for you and your family, no matter how expensive it is. 

With mortgage rates breaking 7% for the first time since last October, this information will help you know what to expect, how to make the process go smoother, know what to expect when buying a home, and, most importantly, how to get the best deal possible. 

The Basic Steps When Buying A Home

In Part 1 we covered steps 1 - 4 (ICYMI, here’s Part 1). Although every home buying process is a little different and unique to its own set of challenges and things to get done, here’s a high-level overview of how it works in 10 essential steps. 

1. Find a real estate agent. 
2. Get pre-approved for a mortgage. 
3. Shopping for a home. 
4. Make an offer. 
5. Get the home “under contract” (meaning the seller accepted your offer and you both sign the purchase agreement to buy the home). 
6. Lock in your rate. 
7. Home inspection. 
8. Home appraisal. 
9. Lender clears title and verifies what the taxes, insurance, and other fees are with the home. 
10. Closing.

If you’re new to this site or didn’t catch Part 1, we highly encourage you to go back and read the first part. There’s critical information covered in it that will help you have less stress and get the best deal when buying a home in Florida. Part 2 will cover steps 5 - 10.

Getting the home under contract

Purpose: To get an agreement in writing for how much you’re buying the home for.
Cost: Nothing; your agent prepares the contract for you.  
Timeline of Completion: A few hours after your offer has been accepted. 

Under Contract:
You and the seller have signed the contract to buy the home. 

Once your offer is accepted by the seller, you’ll both sign a contract that lists the details of the sale. Your real estate agent will prepare the contract for you, but there are some things you’ll need to work with your agent on, primarily the binder, loan approval period, seller credits, and closing date. Having an agent represent you means they are your fiduciary, meaning they have to put your best interest first, ahead of their own and ahead of the seller in order to get you the best deal they can. 

Preparing a contract to buy the home is not something you want to do on your own, especially if you don’t have any experience doing contracts. Any mistake could really screw you over. This is what your agent is for and will do all of this for you. Agents usually work for brokers who help them whenever they have a question. If your agent is an independent agent, they most likely have a lot of experience. 

Some of the big things included in a contract: 

• Binder (or deposit, or escrow deposit)
  The binder is a small deposit you give the seller to show that you’re serious about buying the home. This deposit is made in good faith and is held by the title agent in escrow. You normally give the certified check to your agent, who gives it to the seller’s agent, who gives it to the title company. You can also wire the money to the escrow agent. If you’re buying a home for $350,000, expect the deposit to be anywhere from $2,500 - $5,000. The deposit is applied towards your closing costs.
  
  For example:
  
     $10,000 closing costs
  -  $1,000 binder
  = $9,000 due at closing
  
  The higher price the home, the higher the deposit, and visa-versa.
  
  
• Loan approval period
  This is the period of time you have to be fully approved to buy the home by the mortgage company. If you're dealing with a competent mortgage loan officer, this can be done quickly, but usually goes up to 30 days from the day you sign the contract.
  
  
• Seller credits
  Seller credits are money the seller agrees to give you to help you cover closing costs. They cannot be applied to the down payment, only closing costs; and are capped at 9% (depending on your down payment). Your agent will help you negotiate with the seller to structure the seller credits based on the sales price of the home. Different loans have different levels of allowable seller credits. Check with your loan officer for more details.
  
  
• Closing date
  The date you close is normally about 30 days after you sign the contract, and, if you’ve done everything right to this point, closing in that time frame shouldn’t be a problem. This is why getting fully pre-approved up front is so important: you know for sure you won’t have any trouble getting a mortgage when you find a house to buy. As always, fast, responsive communication is key to success. If you’re asked for a document or to do something, do it fast, don’t wait. Waiting can cause small things to cascade into bigger things that can cause you to miss your closing date and possibly pay extra to extend your rate. 

There are other elements of the contract which your agent will guide you on. Unlike the uniform residential loan application you complete with the lender, there is no nationally standardized or Florida mandated form for the purchase agreement you’ll sign. Each real estate broker uses a contract that is similar and should contain all necessary information to close the deal. Again, this is a step where you simply need to rely on the professionalism, expertise and experience of the agent representing you and your best interest. 

Do I Need An Attorney? 

While you are welcome to pay for an attorney to review all the documents you’ll sign, you’re not required to have one. Some states require an attorney to be involved and they usually work for, or own, the title company doing the title work for the transaction. But Florida is not an attorney state and people have been successfully closing real estate deals for decades without one. Most real estate professionals don’t use attorneys when buying or selling on their own. It’s simply not needed. 

Lock in your rate 

Purpose: To make sure the rate doesn’t change before you close.
Cost: The longer the lock period, the more it costs.   
Timeline of Completion: A few minutes with the mortgage loan officer. 

Rate Lock:
The period of time your rate is locked in and won't change. 

Once you’ve signed the purchase contract and sent the binder in, it’s time to lock in your rate (if you haven’t done so already). Without going into too many ultra-complex details about why you have to do this, a rate lock holds a specific rate for you and prevents it from changing for a certain period of time until you close. Since rates move every day up and down, it’s important to know what the rate will be when you close on the loan. To know this, lenders allow you to lock in a rate for certain periods of time. The most common lock period is for 30 days after you sign the contract. This aligns with the closing date in the contract, which is usually about 30 days after signing. 

The shorter the lock period, the cheaper the rate cost. Here’s an over-simplified example: 

Lock period days: 

15 days          30 days          45 days
$250 credit     $0 credit        $250 cost

No matter where rates are when you go to lock one in, your mortgage loan officer will tell you how much each lock period costs. Remember, you simply need to lock in the rate to give you enough time to close based on the closing date in your contract. 

Rate Extension:
Extending a current rate lock for a fee. 

Good communication, a good agent, and a good mortgage loan officer is key to closing on time. Everyone works as a team to solve problems and clear underwriting conditions as soon as possible. If it takes you days to send in requested documents, that’s not good, and could delay closing. If you miss closing and it’s your fault, you’ll have to pay for a rate extension, which is usually expensive. Pro tip: communicate and send in requested documents quickly. This gives you the best chance to close on time and avoid having to pay for a rate extension. 

What if rates drop after I lock in? 

Who cares? They could also go up, you know. Trying to lock in your rate at the bottom of a cycle is like trying to catch a falling knife when buying a stock at its lowest point. You can’t time the stock market, and you can’t time mortgage rates. Rates change every day; up and down. There’s no real way to know what they’ll be tomorrow or the day after that. If rates fall a lot after you lock in, ask your lender about re-locking your rate at a lower amount. Most lenders, like the ones Bee works with, do this for free if they fall far enough. Some charge. If they haven’t fallen far enough to re-lock, just refinance when they do. 

Most mortgage professionals simply lock in the best rate they can when it comes time to lock one in, regardless of where rates are at that time. And when rates drop enough, they refinance. Easy peasy. 

Home Inspection 

Purpose: To make sure there’s nothing majorly wrong with the home.
Cost: About $500 but could be more depending on the property type and how big it is.  
Timeline of Completion: About a week depending on how fast the inspectors are. 

Don’t ever buy a home without getting it inspected, even if it’s from a friend or family member. A nightmare scenario can ensue. Most people don’t know what’s wrong with their home, and even if they’ve kept it well maintained, there could still be something wrong with it they’re unaware of. The last thing you want to do is buy a home then find out there’s something majorly wrong with it. Now, you’re stuck with it along with the regret of buying it and the cost to fix it. This is why you ALWAYS get the home inspected. 

A home inspection will uncover anything that’s wrong with the home; anything you should know about before buying it. Sometimes, a major problem with the home is found by the inspector that makes the buyer not want to buy the home at all. Other times, smaller things are found, things that won’t stop you from closing but should definitely be repaired before closing or the buyer compensated for with a seller credit. In either case, the problem is fixed to the buyer’s satisfaction. Although most home inspections go well, you’ll be thankful you had the home inspected beforehand if something big or small arises. Otherwise, you have peace of mind that the home you’re buying is alright.  

A 4-point Inspection
If the home is old enough, you’ll want a 4-point inspection done. A 4-point inspection covers the four major parts, or systems, of the home, including the roof, plumbing, electrical, and HVAC. These four major systems age over time and are expensive to replace. Do not count on insurance to cover the replacement cost when they eventually need replacing. Lots of times the inspector will find either something wrong with one of the major systems, or something that’s about to be wrong or need to be replaced soon. 

If that’s the case there’s two ways to resolve these issues:

1. The seller agrees to repair it before closing. 
2. The seller agrees to give you some money, in the form of seller credits, to cover the replacement cost of whatever needs repaired. 

In either case, your real estate agent will negotiate on your behalf to get the issues resolved.  

The inspection is not required by the lender to be completed, nor is it essential to being qualified for the mortgage. Do not share the details of the inspection with the lender as it could ruin your chances of getting approved for the home loan. Although the lender does not require the inspection to be completed, if they see something in it that is a concern to them, it could mess up the loan; so, keep it to yourself and your agent. 

The cost of the inspection is not a part of closing costs, and you risk paying for the inspection and not closing on the home if there’s something major that’s wrong with it. In that scenario you’d be out the money spent on the inspection, however, you’d save yourself a lot more money by not buying a home with something big wrong with it. 

Home Appraisal 

Purpose: To establish a fair market value of the home.
Cost: About $500 but could be more depending on the property type and sales price of the home.  
Timeline of Completion: About 1–2 weeks depending on the lender and how fast their appraisers are. 

After you lock in your rate, the mortgage company will order an appraisal, which you pay for up front when it’s ordered. The cost of the appraisal is a part of closing cost that you’ll pay when you close. You do not need to be there when the home is appraised. Either your agent or the seller’s agent, or the seller themselves, will schedule a time with the appraiser directly and meet them at the house on the arranged day and time. 

Contract Price:
The home sales price as written in the contract. 

Once the appraiser is done looking at the property, they’ll deliver the report to the lender. You and your agent will get a copy of it as well. The seller does not get a copy of the appraisal. Strategically, there’s no reason for them to know what it appraised for so long as you’re happy with the value. 

A Good Appraisal 
An appraisal that comes in at the contract price or higher.  

A Bad Appraisal 
An appraisal that comes in lower than the contract price.

Instant Equity
You get instant equity when an appraisal comes in higher than the contract price. 

Instant Equity Example:

$300,000 contract price 
$325,000 appraised value
= $25,000 instant equity

If you get a bad appraisal, your agent will ask the seller to lower the contract price to match the appraised value. And while most sellers agree to do so, if they refuse, you might have to bring the difference to closing in order to qualify for the mortgage. Lots of times the seller will agree to give you seller credits to make up the difference. These seller credits help you cover closing costs. 

Sometimes there are problems with the home the appraiser requires to be fixed before issuing the appraisal report. If this happens, the seller should be willing to fix them. After all, the seller wants to sell their home, but without an appraisal, a buyer won’t be able to get a mortgage to buy it. So, the seller is motivated to fix anything that's wrong with the property the appraiser says needs to be repaired. 

Lender clears title and verifies what the taxes, insurance, and other fees are with the home. 

This is all stuff the lender does on their end while the home is being inspected and appraised. There’s nothing for you, the buyer, to do during this time. Once the lender clears title, appraises the home, and verifies all taxes and dues associated with the property, the file will go into underwriting for a final review and approval. At some point during this period you’ll schedule a time to close on the home with the title company. 

Your mortgage loan officer will give you a Closing Disclosure that details the final numbers of your home loan. It includes: 

• How much money you need to bring to closing. 
• The interest rate. 
• The APR. 
• The total monthly mortgage payment. 

There are some other information on the documents, but those are the most important things to know. 

Closing

This is the day you’ve been waiting for! Be prepared to sign your name a gazillion times on countless documents, but it shouldn’t take too long; maybe 30 - 45 minutes depending on how many questions you have. 

Pro Tip: you can’t change any of the lending disclosures in the closing documents. The most important one you should have already reviewed with your mortgage loan officer, the Closing Disclosure, which details in writing the rate, APR, total monthly payment, and closing costs. 

  

Now, go live out your dreams in your new home!