Real Estate Trends And Tips For Young Buyers In South Florida

By Susan Doktor

Think you’re ready to take that big step of buying a home? Real estate market and mortgage experts might say maybe…or maybe not.

The South Florida real estate market is red hot right now and has been for some time. The demand for new homes has outpaced the supply, driving home prices higher. That means home buyers are facing stiff competition, even in an inflated market. How inflated? In Palm Beach County, home prices increased by 23.3% over the past year. In Broward County, they rose by 20.4% and, in Miami-Dade, by 17.4%.

On the flip side of the home cost coin, mortgage interest rates, which reached historic lows during the early stages of the global pandemic, are on the rise again. No one can predict how high they’ll go—that depends quite a bit on how the Federal Reserve Bank responds to the economic recovery we’re experiencing. Today, the average interest on a 30-year fixed-rate loan—the most commonly chosen type of mortgage—is over 4.76%, up from 3.18% just a year ago. That makes money more expensive to borrow and increases the lifetime costs of owning a home.

If all of that sounds a little discouraging to you, take heart. According to the last US census, 47.9% of millennials are homeowners. While a much smaller percentage of Gen Z’ers own homes, their numbers are growing. So realizing your dream of homeownership is well within the realm of possibility. What’s more, there are ways to get ahead in a competitive market. It takes forethought. And you’ll need to take action before you even start shopping for a home and mortgage. The concepts are simple, though not always easy. So let’s take look at how you can position yourself to buy a home you love at a price you can afford.

Tip One: Get Creditworthy

Have taken a look at your credit report lately? The time to do so is before you even think of applying for a mortgage. So download free copies of your report from all three major credit reporting bureaus. Yep, there are three. Your report from one may not be a mirror image of the others and each bureau might give you a different credit score. Why focus on your credit? Because your credit profile is the single most important criterion mortgage lenders will use in deciding whether to give you a mortgage and at what interest rate.

To take out a conventional mortgage, you’ll typically need a credit score of at least 620. But most homebuyers have credit scores north of 700. If you want to compete for the best mortgage interest rates, that’s where you want your score to be. If you find your score isn’t top-notch, there are a few steps you should take immediately to bring it up:

• Make sure you are up to date on all of your credit accounts. Accounts in arrears figure heavily in low credit scores. At the very least, make the minimum payment due on all of your accounts each month.

• Examine your report carefully and look for errors that may be bringing your score down. Credit bureaus make mistakes. Look for late payment remarks that don’t jibe with your own records. Make sure there are no accounts you don’t recognize on your report—that can be a sign that your identity has been stolen, actually. If you find any mistakes, report them immediately to the credit bureaus who made them. It will take some time, but you can have mistakes removed from your report. And it’s worth the effort if you’re shopping for a home.

• Pay down your high-interest credit card accounts first. If you have a lot of them, you might even consider gathering all of your bills under one umbrella by taking out a lower-interest consolidation loan. Having fewer open accounts on your credit report can improve your score.

Tip Number Two: Figure Out How Much Home You Can Afford

You can learn all kinds of things on the internet, including how pricey a home you’re likely to be able to handle on your budget. Check out an online calculator to zero in on a target home price as you search the market for your home. Lenders use the same kind of calculations when they consider you as a mortgage candidate. You’ll save yourself time and, possibly, some disappointment, if you don’t aim too high.

Tip Number Three: Investigate Low-Cost Mortgage Options

There are two basic categories of loans: private loans offered by banks, credit unions, and other for-profit lenders and US government-backed loans. You may be eligible for a low-coast loan if you are a veteran, plan to purchase in a USDA-designated location or qualify as a first-time homebuyer. Government-backed loans normally come with lower interest rates than private loans. They typically have lower credit qualifications, as well, so if your credit needs some polishing, these loans can be an attractive alternative. What’s more, in the case of VA and USDA loans, you may not even need a down payment to qualify. Government-backed loans put homeownership within reach for many Americans of smaller means.

Tip Number Four: Calculate the Full Cost of Homeownership

Mortgage lenders require buyers to carry homeowner’s insurance on their properties. Cities and towns levy real estate taxes. Your monthly mortgage statement will typically include these costs. But there are other, significant expenses associated with owning a home. If you purchase a condo or a home in a private development, you may be assessed Homeowners Association (HOA) fees. You’ll need to figure in home maintenance costs, which you can expect every year. And the first year of homeownership is typically the most expensive. On average, homeowners spend about $7000 on home improvements when they purchase a new home. Even more, if you’re buying a fixer-upper.

Tip Number Five: Don’t Go It Alone

Buying a home is complicated. You’ll be making life-altering decisions on several fronts. You’ll be signing legal contracts. Particularly if you’re a first-time buyer, you need an ally who will represent your interests throughout the home buying process. That’s where a savvy realtor comes in. In addition to pointing you in the direction of homes that meet your personal and financial needs, realtors can advise you on a wide range of matters. They can recommend the best lenders to work with. Connect you with contractors who can estimate the cost of home repairs you might want to make. Help you write an offer that has a better chance of being accepted. And most importantly, tell you, in layman’s terms, what all the legal documents you’re signing at closing mean. Choose an agent that has experience selling homes in the neighborhood where you’re buying and don’t discount the comfort factor. Ask your real estate-savvy friends who they recommend. And find someone easy to talk to. You’re going to have a lot of questions. Choose an agent who’s happy to answer them and you’ll find the process of buying a home not only less confusing, but more fun.