Matt E. Bales, Jr., Esq.
The Miami real estate market is one of the most active real estate markets in the Country due to
exceptional weather, outstanding employment and business opportunities, and no Florida state income
tax. Miami also has a constant stream of first time home buyers from the local area as well as people
relocating from other major cities such a New York, Chicago and Los Angeles. Although searching for
your first home is exciting and a wonderful process, it is important for Miami first time home buyers to be
aware of some common mistakes that can be made and suggestions for how to avoid them so that first
time home buying in Miami is a pleasant and memorable experience.
Not knowing what you can afford.
Many Miami first time home buyers make the mistake of not truly understanding what they can afford to
pay for a house on a monthly basis which can lead to serious issues down the road. Some first time home
buyers find their dream home and even if it costs more than they expected they are eager to proceed with
the purchase without fully analyzing the financial aspects of home ownership. To avoid this common
mistake it is advisable for a Miami first time home buyer to perform a detailed analysis of their monthly
income and compare it with all of their monthly expenses and also to factor in a reasonable cushion for
unexpected expenses. This will allow you to set a realistic home buying budget and avoid being house
poor which happens when a home buyer spends all or a substantial portion of their available money on
owning a home. Regardless of what any particular lender says you are pre-qualified for it is best to
perform this detailed financial analysis so you have money left over at the end of each month instead of
trying to find additional money to make your loan payments.
Underestimating the amount of cash you will have to spend to close.
Closing on the purchase of a house in Miami will require you to have available cash for escrow deposits
under the purchase contract and the closing costs which often include taxes, insurance and third party
service provider fees such as closing fees, title search fees, lien search fees and survey fees. Additionally,
if you are financing the purchase of the house with a lender, the lender will have its own set of fees such
as origination charges, appraisal fees, credit report fees, and upfront and ongoing escrow reserves for
taxes and insurance. All of these fees and charges are not included in the purchase price of the house and
can be a surprise to many Miami first time home buyers. In order to avoid being surprised by all of this, a
first time home buyer can get an estimate of the title related fees and costs from a Miami attorney
operated title company before entering into the purchase contract and, if the purchase will be financed
with a loan, then also an estimate of the loan related costs from potential lenders.
Making large purchases during the home buying process.
Another common mistake that many Miami first time home buyers make is receiving their loan approval
from their lender and then making large purchases on credit cards or through some other alternate
financing arrangement. The issue with this is that loan approvals are based on highly detailed financial
criteria relating to the buyer especially the buyer’s credit score and debt-to-income ratio. A large
purchase by a buyer prior to closing will affect these financial criteria and could change the loan amount
you were previously approved for and could cause the need to start the loan approval process all over
again. Therefore, once a loan is applied for in connection with purchasing a home it is best to not make
any large purchases on credit until after the closing.
Being unaware that future expenses (some major) will occur.
Home ownership for Miami first time home buyers is an exciting new beginning. However, the expenses
incurred on purchasing the home are just the beginning and new expenses will continue to be incurred.
There will be furniture and furnishings to be purchased, likely increases in taxes and homeowner’s
insurance over time, maintenance on items such as HVAC systems, the roof and exterior painting, and
making upgrades to certain parts of the home. Miami first time home buyers need to be aware that just
because they closed on buying a home does not mean that they are finished spending material amounts of
money on their home. Therefore, it is advisable for Miami first time home buyers to keep on hand extra
money in savings so that they are able to pay for future expenses as they arise.
Purchasing a home in Miami can be challenging for first time home buyers but the rewards of home
ownership greatly outweigh the potential mistakes that can be made. Experienced professionals such as
attorneys, title companies, realtors and lenders can assist first time home buyers and carefully guide them
so that the common mistakes to home ownership can be avoided.