While South Florida’s real estate market doesn’t have to worry about a cold snap keeping buyers indoors, we still have cycles. And spring is a busy season for buyers and sellers.
With interest rates expected to rise multiple times this year, we expect this spring and summer to be particularly frenzied as buyers try to save money on financing. So what can you do to lead the pack of house hunters? Whether this is your first house, a vacation home, or an investment property, here are a few tips to keep the process smooth.
1) Get your credit in order.
Once you know you’ll be in the market for a new home, you should make sure there are no surprises in your credit report. Each credit reporting agency (Transunion, Equifax, and Experian) is required by law to provide one free credit report to you every 12 months at your request. Pull your report to see if there are any mistakes and take steps to correct them.
You might also want to have your credit score checked to know what sort of financing options will be available to you. Pay down your credit cards as much as possible and stop using them until after your contract is closed. A lower debt-to-credit ratio will improve your score and save you money in the long run.
Your credit score is recalculated monthly, so take steps to improve your rating early in the process. That way, you can put the best possible foot forward when you visit your lender.
2) Make your list, and check it twice.
Before you start visiting houses on the market, you should have a solid idea of what your dream home looks like. Are you interested in an historic home, or do you prefer new construction? Is condo living at the top or bottom of your list?
Make a list of must-have features. These are not the options that would be nice; these are the items that would be deal breakers if you don’t have them. For example, if you know you can’t live with fewer than three bedrooms, that is a must-have. But don’t let the list grow too long, because a long list of must-haves means you will find far fewer options to choose from.
Certain features, like a wine cellar or a hot tub, might be better suited to your wishlist. That way, if they happen to be part of the house you find, that’s great. If they’re not available, you won’t lose any sleep over them after signing the contract.
If you’re on the market with a partner, be sure to compare your lists. You want to be a united front when it comes time to look for potential homes. You might not agree on every issue, but deciding in advance how to deal with disagreements should lead to less arguing overall.
3) Determine your budget.
A list of must-haves and wishes is fun to look at, but it will need to match your budget if you want to make your dream home a reality. The first step to making that happen is calculating how much house you can afford. Three major factors determine this number: your down payment, your income, and your debt.
The downpayment is the amount you can put toward the house immediately, without financing. If you can manage at least 20% of the purchase price, you will avoid private mortgage insurance (PMI). This insurance protects the lender in the case of a default, and it means an extra monthly responsibility for you.
Your income and your debt combine to create your debt-to-income ratio, a number that lenders use to calculate how much house you can afford. There are numerous calculators available online, including Bankrate’s “How Much House Can I Afford?” and Zillow’s “Debt-to-income Calculator,” that will give you estimates.
You should also consider getting pre-approval from your lender. This tells you how much the bank is willing to lend you. It also ssures sellers that you are a serious buyer who has financing lined up.
Be cautious, though. Don’t think that the pre-approval number, or the number that an online calculator says you can afford, is the amount you should spend on a property. That number is only a calculation of the maximum amount that a bank is likely to lend based on the personal financial information you have supplied. If you don’t wish to spend that much each month, then it is up to you to create your own limit.
4) Choose your neighborhood.
We don’t need to say, “Location, location, location.” do we? Sure it sounds like a cliche, but just keep this in mind: you can’t change the location, location, location after you have made the purchase. Property is fixed in position forever. So make sure you’re satisfied before you sign on the dotted line.
If you already know what part of South Florida you’re interested in, start researching specific areas and neighborhoods to narrow your search. A knowledgeable real estate agent can be invaluable in this process. They should know which areas are well-established and which are on the rise, as well as the general personality of each neighborhood.
Regardless of what area you decide to explore, you should visit at different times of the day (and on different days of the week) to get a good feel of what the neighborhood is like. Is traffic more congested on Tuesday than it was on Saturday? Is it busier or louder at night that it was by day? A little exploration can help you determine if the area feels like home.
5) Be patient. Be Realistic.
As the market picks up, you should expect to be in competition with other buyers.
Multiple offers may occur on homes that are very desirable and in very popular price ranges.
Keep searching until you find a home that suits your needs. If you’re looking at resales, you will rarely find a home that gives you 100% of what you have in mind, because someone else has designed and decorated that home. But if that home checks off 70% or more on your “must-have” list, you have probably found a home you will love.
So if you find that house and you’re ready to purchase, make sure your offer is realistic based on market conditions. And don’t worry, there is a house out there waiting for you. All you need is time, energy, patience, and a good realtor.