If you’re a new buyer or haven’t purchased a home in a while, this guide will give you all of the information you need to have a smooth closing.
HGTV makes it seem like you should call a Realtor®, see three houses and pay just under asking for the home of your dreams. The truth is, there are some steps you absolutely must take before you step foot inside of a home. These steps will make certain you are able to buy a great home that fits your budget.
Your credit score will play a huge part in the interest rate you will pay on your mortgage so it is worth the time to improve it. I highly recommend you run your free annual credit report and look for any negative marks. Work to fix these so your score improves.
Currently, Tori Juran at Movement Mortgage is able to lend conventionally at a 620 credit score and in some instances a 580 score for FHA loans. However, as you can imagine, the rates are going to be much higher when you meet the bare minimum.
For example, a $300,000 loan at a fixed rate of 3.5% will be a mortgage payment of $1,347 per month. Raising the interest rate only 0.25% to 3.75% will cost you an extra $42 per month. Small changes to your credit report could mean lots of savings in your future.
Your debt-to-income ratio simply takes your debt and divides it by your income. Sounds easy enough and it is! What this means is that to improve the ratio, you can either make more money (very challenging) or pay down your debt. If you have the ability to pay down debt without sacrificing your down payment savings, it is worth it! This will also have an influence on your interest rate so do not let this slide.
One of the most common misconceptions I hear from people is that they cannot buy because they do not have 20% to put down on their home. This misconception has cost people so much time and rent money and it simply isn’t true. It’s great if you can put down 20% on a home which saves you a monthly private mortgage insurance (PMI) fee, yet most cannot. There are programs such as a USDA loan that will allow you to put 0% down! That said, the most common amounts are 5% down for a condo and 3.5% down for a single family home. Yes, there are various programs with different down payment requirements so speak with your lender about the options you have.
Finding a mortgage broker that you want to work with and is reliable enough to get you to the closing table can be a tough task. Simply ask your Realtor® for recommendations. I always recommend Tori Juran or Lauren Maxwell to my customers. Both are local to Naples, Florida, amazingly talented and dedicated to you having a smooth closing. Also, you can apply online right through their websites.
Once you have applied for a mortgage and received approval, you will have a strong estimate of what interest rate you will pay and more importantly, you will know how much home you can afford!
Please remember that just because you can afford up to a certain amount, you don’t need to spend that much. You never want to be “house poor” where too much of your money is going to your mortgage leaving you with little left over to enjoy life. Once you have that number though, it is time to shop!
One of the quickest ways we can refine your search results for your home is to have a good idea of where you want to live geographically. Here in Naples, we commonly hear people say they want to be west of I-75, in North Naples, or East Naples, and often close to the beach. Perhaps you have a maximum time you want to commute to work, a church you want to be close to, or restaurants and activities you like. Whatever your situation is, narrowing down the geographic area will really help you hone in on the individual homes to pursue.
I absolutely love when customers come to me with a well thought-out list of needs and wants. This list will help give me as your Realtor® the important guidelines for our search and will keep us from spending time at homes that do not fit your needs.
As an example, do you need a 3-car garage or do you want one? Many people truly need a big garage, yet for others it would be nice to have. Think through the cost of these features and decide what you truly need your next home to have.
No surprise here—this is my favorite step! Hiring a Realtor® is a huge step for you to take because this is the person that not only must know the area, but is someone that is going to negotiate on your behalf to get you the home you need at a price you can afford! When you think about it in those terms, it simply doesn’t make sense to hire someone because they’re your friend, a relative or worse, someone a friend of yours happens to know.
Ask your agent to provide you with a list of their recent sales including the asking price of each home and the actual sale price. What you might find is that many agents are part-time and don’t have many sales to even speak of. Others may have a long list yet you’ll see that their buyers paid closer to asking price.
Finally, most Realtors® are going to require you to sign a “Buyer-Broker” agreement. This agreement locks you in to using that agent for a certain amount of time (often 6 months) or you will have to pay that agent a commission if you buy a home from someone else.
Do not sign a buyer-broker agreement!
I will never ask my customers to commit to me in this way. If my customers aren’t happy, leave! Use someone else! Is the agent so unsure of herself that she needs you to be contractually obligated to using her?
This is too big of a decision to get stuck with an agent that you have lost confidence in.
I look at it in a different way. Imagine you went to the dentist because of a toothache. You need help and the dentist walks into the room with a clipboard in hand and says, “This document will lock you into using just me for your dental work. If you end up not liking me, that’s really too bad. You’ll be stuck using me or paying me a commission if you go to a different dentist.” Chances are, you’d leave the office with your same toothache and the same is true for picking your Realtor®.
You’ve made it to the really fun part of your real estate search. It’s time to start looking for your next home and neighborhood.
At this point, you’ve chosen a Realtor® and have your mortgage ready to go. You just need to find the right house and neighborhood.
Give your Realtor® your needs and wants list and explain that you want brutal honesty both from your Realtor® and in the feedback that you provide. I tell my clients that I want them to tell me when they truly hate something about a home I show them. That feedback is invaluable because it allows me to refine my client’s search in a way that only shows houses that are a great fit.
The MLS system that we use will allow your Realtor® to send you listings automatically that match your needs. You then have the ability to mark the houses or condos as favorites and even leave notes on each one. When you mark a property as a favorite or leave a note, your Realtor® will get an email and be able to respond to your questions.
Personally, I love getting notes on homes that say, “We don’t like this layout” or “The kitchen is too dated.” Just think of how valuable that feedback is so I can adjust the search accordingly!
Let the fun begin! Now that you have a list of homes you like on paper, it’s time to travel to the neighborhood and see them in person. I prepare a book with printouts for my customers and provide them with a pen so they can make notes as they see homes. When looking at multiple homes in one tour, they start to blur together. In other words, you will remember not liking a particular aspect of a home yet not able to remember exactly which home that was! Take notes, speak with your significant other, and be very open and honest with your Realtor®.
The fact is, most homes in Southwest Florida are going to be in a Homeowner’s Association (HOA) or Condo Association. Most HOA’s are going to offer something of value to their residents other than a set of rules and regulations. Many HOAs include things like landscaping, cable TV or internet, water and more. You’ll pay an HOA fee (usually quarterly) and these fees can range from the low $100’s a month to thousands of dollars each month in higher-end communities.
The trap I see new buyers fall into is that they’ll ask what the HOA fee is but not which services are included. You may see one property with a $200/month HOA fee that includes landscaping and another that is $225 a month but includes landscaping, cable television and Internet. In this case, the extra $25 a month is well worth it as cable and internet from Comcast could run you $150 a month alone! Your agent will be able to tell you what exactly is included and help you work through which neighborhood is a fit based on your lifestyle and budget.
There are many rules that are important for you to review before you can safely pick a neighborhood to live. Some questions to ask yourself are:
These are all concerns for HOA’s. In Naples, most neighborhoods will not allow commercial vehicles. Many do not allow pickup trucks regardless of whether they’re personal or commercial vehicles. Almost every neighborhood has pet restrictions.
Before you write an offer, you need to make sure the neighborhood is a good fit based on many factors your Realtor® can review with you. We’ve heard the stories of people entering into a contract and finding out later that their beloved dog cannot live in the neighborhood and the agent didn’t catch that issue beforehand. Pay close attention to the rules and regulations for each neighborhood you’re in and rely on your Realtor® to give you truthful and accurate information.
You made it to the HGTV portion of the process and it’s time to make an offer! On TV, we would meet at a trendy coffee shop or restaurant and you’d surprise your agent with your pick. In reality, your agent will probably already know your choice as you’ve shared it with him already. It’s time to get your house!
Writing an offer can be a stressful part of the home-buying experience. How much should you offer? Are they going to counter? Are there other offers on the home? These are all areas where your Realtor® can offer expert guidance.
This is where having an expert, full-time Realtor® on your side can save you thousands of dollars.
Making an offer isn’t about guessing what the seller will accept. It is about looking at similar properties in the area that have sold recently and using those figures to guide you to a reasonable offer that has a strong basis and is justifiable. When we base an offer off of comparable properties, it allows a skilled agent to speak to the seller’s agent and explain why the offer is what it is. Since so many homes are in HOA’s and have similar floor plans, we can often find a home that is nearly identical to base an offer on. In other situations, the homes vary—one may have a pool and yours does not or perhaps one has a den instead of a 3rd bedroom. Regardless, we can use those comparable properties to craft an offer and not a guess.
An offer is not just a price you’re willing to pay. Although that’s the big part most sellers will focus on, other factors come into play. You will be choosing a closing date, whether or not you’ll have a professional inspection, what good-faith deposits you’ll put down and more. All of these small details will have a big effect on whether the offer is accepted or not.
As an example, I asked a seller’s agent when the sellers would want to move. They did not expect an offer on their home so quickly and so they would have to put their belongings in storage and move to a short-term rental. That was not ideal by any means and so we made our offer have a longer closing time allowing the sellers to stay in their own home and avoid paying for storage.
Often, crafting an offer where you take into account the seller’s needs and wants in regards to the small stuff can make the difference between a deal or a failed attempt to purchase.
It is rare to make an offer and have it accepted without a counter. That’s just the way it goes in our country. There’s bound to be a counteroffer and it will be up to you to decide if you’ll take it.
Now that you’re prepared and full expecting a counter, you need to look at whether or not you will accept it. Too many times, I see customers fall in love with a house before they own it and will make irrational decisions as a result. You’ll certainly have a maximum number in your head that you’ll pay for a home so do not go over that amount!
This is another opportunity for your Realtor® to give you expert advice on whether or not the counteroffer is reasonable. This isn’t a gut feeling but again guidance based on comparable sales.
Allow your agent to do her due diligence to help you make the right decision.
Congratulations! Your offer has been accepted! If you watch shows like House Hunters on HGTV, you’ll expect to sit back and wait for closing. You still have some decisions to make at this point and your Realtor® is going to really get to work to get you to the closing table on time and without issues.
This is where your Realtor® earns his keep and shows his value. You have some decisions to make and tasks to do, all with the guidance of your expert.
One big decision you make (technically you make this when you make the offer) is whether you will use a lawyer or a title company to handle your closing. Generally speaking, a title company will charge about $500 to handle a transaction and a lawyer will charge around $1,000 for similar services. The difference is that if a dispute arises, your lawyer will go to work for you generally without asking for additional compensation. When you’re spending hundreds of thousands of dollars on a home, it doesn’t make sense to save $500 on a title company. We advise our customers to use a lawyer for their closings.
The contract that we use dictates the schedule of deposits. In Southwest Florida, it is customary to make your first deposit within 3 days of the accepted offer and a second deposit in 15 days. These are negotiable but that is the norm. Your deposits will go into escrow and be held with your title company or lawyer to secure your property and help the seller feel like you’re committed to the contract.
You applied for preapproval earlier so you could make the offer, yet now is the time to finish up and secure your mortgage. Your lender will want to check all of the boxes and do things such as verify employment or get updated bank statements. You’ve done most of the work already so this step is very easy. Here in Naples, it is customary that you fully apply within 5 days of an executed contract.
This is a step that I’ve seen other agents miss. As an owner in a neighborhood, you’re a member of the association and therefore you need to apply. I have never seen someone get denied but it could certainly happen for a number of reasons, primarily criminal background. Your HOA application will ask for ownership or rental history, pet information, employer information and those sorts of things. It’s a very easy process and usually has a fee of about $100 per adult.
Your lender is going to require you to have homeowner’s insurance before you can close on your house but you’d want to have that anyway. You will want an experienced agent, such as Jennifer Johnson here in Naples, that can not only give you her quote but compare competing quotes so you know what you’re policy will cover and at what cost. Here in Southwest Florida, flood insurance is an additional cost that many will need to add. You can also save money sometimes with a wind mitigation report from your inspector.
All four of the commonly used contracts in Southwest Florida (Naples Area Board of Realtors Sales Contract, As-Is Contract or the FAR/BR contract or FAR/BR As-Is) allow for the buyer to get an inspection on the home. Two of the contracts require that inspector to be licensed while the as-is contracts allow anybody to inspect. This important step is going to tell you what issues the home has and the contract gives 6 areas of inspection to focus on:
Once the inspector has finished and prepared a report of the home’s condition, we can ask for the defective items to be repaired prior to closing or for the seller to provide a credit. Note that we ask for these things. The seller can reject our requests. In that case, we would have the right to walk away from the deal.
A home inspection by itself will identify defective items in the home yet common add-ons include mold inspections, termite/wood destroying organism inspections or radon.
Again, you’re paying hundreds of thousands of dollars for a home—don’t get cheap when it comes to inspections.
We recommend Cottage 2 Castle Home Services and Gulfshore Home Inspections, Inc. for our customers. We love both of these companies because they are very thorough, very detailed, and genuinely know what to look for.
Your home appraisal is going to be ordered by the lender so you do not have to do this part on your own. However, there may need to be negotiations if the appraisal comes in lower than the price paid for the home.
When an appraisal comes in low, the bank will not let you proceed because they feel you are overpaying for a home. Your Realtor® will have to go to bat for you to get the price down to appraised value.
What if the appraisal comes in higher than we thought? Great news! You have built-in equity in your home the day you close on it!
The sellers will often have a copy of the survey. In the Naples contract, it states that if the owners have a survey, they must provide it to you. If not, you can get your own. Your survey will show you on paper where your property lines fall. It isn’t a very exciting document!
This is the day you’ve been waiting so eagerly for! On closing day, you’ll go to your lawyer’s office if you’re in town (yes, you can close from anywhere on Earth) and sign a large stack of documents. The mortgage is the main reason you’re signing so many pages but don’t worry—your Realtor® will be there as will the closing agent to answer all of your questions as you sign. Expect to be there for roughly an hour.
At the end of signing, you’ll receive the keys to your new home or condo! It is so important to make sure you have all of the keys you need, garage door openers and even the keys to the neighborhood amenities in many cases. You’ve made it! Welcome to your new home!
You may have signed a pile of papers and handed a set of keys, but you’re not done yet!
It’s time to change the locks on the doors and garage door openers. A handyman or locksmith can do this for you for little money although it isn’t too hard to do on your own. Consult YouTube for instructions on reprogramming your garage door opener.
If your association doesn’t pay for your electric or water, you’ll need to get both of these put into your name. Visit Florida Power and Light (FPL) online to establish electric service in your name. Set up water with Collier County Water Division. You will need your executed closing statement to prove ownership before they will transfer the water into your name.
You can change your address with USPS online.
You can change your driver’s license address online as well.
Often forgotten, you will want to change your address with your credit card companies to ensure charges aren’t denied. Call each directly or visit their websites for more information. Also, if you have any other bills coming to your home, make a list and call each one. Tip—look at your bank statements to refresh your memory of companies you pay that will need your new address.
Your Realtor® is your guide through this lengthy process and I love every step of it. If you are looking to purchase a new home or condo in Southwest Florida, please consider the Listing Naples Group. We take so much pride in what we do and our reviews show how hard we work for each one of our customers, regardless of price point.
Please feel free to contact us with any questions you may have or to set up a time to interview us.
We can also be reached by call or text at (239) 248-8171.