Guide for First-Time Homebuyers in Seminole & Orange County Florida - Part One of Two (Choosing a Realtor and the Home Buying Process in Central Florida)
What are the benefits to buying, compared to renting in Central Florida, Orlando and Lake Mary?
A home is an investment. When you write your monthly rent check, that money is gone forever. However, when you own your home, you can deduct the cost of your mortgage loan interest from your taxes. This will save you a lot of money each year, because the majority of your monthly payment for the first few years of your mortgage is applied toward interest. You can also deduct your property taxes. Plus, the principal amount that you pay on your mortgage is like an automatic savings account. In addition, during most times, the value of your home may go up over the years. You'll want to consult a Realtor to make sure you're making a good purchase. Finally, you'll enjoy having something that's yours - a home where your own personal style will tell the world who you are. And that pride in ownership is a great feeling! There's a great book called The Automatic Millionaire Homeowner, by David Bach, and it illustrates many of these points, as well as how you can build wealth by being a homeowner.
Should I use a real estate agent?
Using a real estate agent is a very good idea and makes sure you're interests are protected. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate agent will be well-acquainted with all the important things you'll want to know about the neighborhood you may be considering, and will direct you to the proper resources to help in your research of...the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more. He or she will help you figure the price range you can afford and search for homes you'll want to see. With immediate access to homes as soon as they're put on the market, the agent can save you hours of wasted time driving-around. When it's time to make an offer on a home, the agent can point out ways to structure your deal to save you money. They'll even use their expertise to negotiate the best possible price on your new home. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. The best part is that you don't have to pay your agent anything! Your agent is paid by the seller.
How much money do I need to buy a home?
It all depends. You'll need to have enough money to cover three costs: earnest money - the deposit you make on the home when you submit your offer, to prove to the seller that you're serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you would like, or are required pay when you go to settlement; and closing costs, the costs to actually transfer ownership when you buy a house.
When you make an offer on a home, your real estate agent will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies and is determined by the seller. It is also negotiable.
The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That's why many first-time homebuyers find an FHA loan to be their best option. FHA loansU require only 3% down - and sometimes less. There are even options for the seller to contribute that 3% down payment for you. Use your Realtor to negotiate on your behalf.
Closing costs - which you will pay at settlementU - average 3-4% of the price of your home. These costs cover various fees your lender charges, title insurance, fees charged by the government and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won't be caught by surprise. Again, if your Realtor is a good negotiator and if the loan program allows, your real estate agent may be able to get the seller to pay many or even all of your closing costs.
When I find the home I want, how much should I offer?
Again, your real estate agent can help you here. But there are many things to consider. Is the asking price in line with prices of similar homes in the area? Is the home in good condition or will you have to spend a lot of money customizing it to your tastes? How long has the home been on the market? If it's been for sale for awhile, the seller may be more eager to accept a lower offer. How much will you need to borrow? Make sure you really can afford whatever offer you make. How much do you really want the home? The closer you are to the asking price, the more likely your offer will be accepted. Even in this market, you'll find yourself bidding against others for the same home and in these cases, you may even want to offer more than the asking price. And remember, when you make a low offer, a good listing agent will call any other buyers who've expressed an interest and get them to make an offer as well, working to get higher offers for their seller. There are rewards in making low offers, but first prepare yourself that it could cause you to lose out on getting the home.
What if my offer is rejected?
Now your Realtor will begin negotiating once agai. You may have to offer more money, but you may ask the seller to cover some or all of your closing costs or to make repairs that wouldn't normally be expected. Often, negotiations go back and forth several times before an agreement is reached. Don't get so caught up in negotiations that you lose a home that you both want and can afford!
What happens once my offer is accepted?
Once your offer is accepted, your real estate agent and lender will be working diligently behind the scenes to ensure all the details are handled. The property will be researched by a title company to ensure there are no legal issues which will harm you in the future. You'll also want to schedule a home inspection and also a wood destroying organism inspection. You may also want to schedule a mold inspection. Your Realtor will be able to help you arrange these inspections. Once complete, you'll be able to review the report and evaluate any items of concern. If there are minor issues, your real estate agent will have probably negotiated a repair allowance in the initial offer, and these may be repaired at the seller's cost. Any major issues could be a reason for you to decide against purchasing the home, or it could be reason to begin the negotiation process once again. You're real estate agent will be looking out for your best interests and can advise you on these issues as they arise.
So what will happen at closing?
Basically, you'll sit at a table with your Realtor, the real estate agent for the seller, probably the seller, and a closing agent for the title company or attorney. The closing agent will have a stack of papers for you and the seller each to sign. While he or she will give you a basic explanation of each paper, you may want to take the time to read each one and/or consult with your real estate agent to make sure you know exactly what you're signing. After all, this is a large amount of money you're committing to pay for a lot of years! At least 3 days prior to closing, your lender is required to give you a booklet explaining the closing costs, a "good faith estimate" of how much cash you'll have to supply at closing, and a list of documents you'll need at closing. If you don't get those items, be sure to call your lender BEFORE you go to closing. And, don't hesitate to ask questions.
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