The Most Common First-Time Buyer Mistakes in Florida (and How to Avoid Them in Central Florida)

Buying a home is a huge undertaking, especially when buying your first home in Florida. For most people, it’s the biggest investment they’ll ever make. That’s probably why people frequently ask us: What mistakes do first-time home buyers make? The answer is, it’s rarely about timing. First-time homebuyer mistakes in Florida in Gainesville, Ocala and Marion County usually involve underestimating your costs and overlooking the kind of pitfalls that every homebuyer must watch out for.

Why First-Time Buyers Lose Money: It’s Rarely the Market

Many first-time homebuyers ask us when the best time is to buy a home in Gainesville, Ocala, and Marion County. Some people try to time the market, looking for the best buying opportunity, or think they know where interest rates are headed and adjust their timeframe accordingly. Market timing is next to impossible to get right, even for the most seasoned of realtors or economists. If you’re buying a home in central Florida, your finances are in order, and you find a place you like within your price range—THAT is the best time to buy. 

Shopping for Homes before Talking to a Lender

The ability to qualify for a mortgage is a crucial part of the home-buying process. If you’re looking to buy a home in central Florida, your first step should be finding out how much you could borrow and the interest rate you’re likely to receive. If you’ve checked out real estate listings online, you may have seen an offer to get “prequalified” for a mortgage. You submit basic information about your income and credit score and the website gives you an estimate of the type of mortgage you might qualify for. It has no real bearing on whether you would actually qualify for a mortgage.

A mortgage preapproval is entirely different. You would speak with a lender, such as a banker or a mortgage broker and give them detailed information about your income and debts. They would ask for copies of your financial documents such as W-2s and bank statements. They would give you a preapproval letter that indicates the maximum amount you could borrow and an interest rate.

This does not guarantee that you would qualify for a mortgage, but it does give you a clear idea of what you can afford. It also means you can bid on a property. A realtor will not take your offer seriously unless it includes a preapproval letter. When you make an offer on a property and it’s accepted, that’s when you would formally submit your application for a mortgage and find out what your interest rate will be.

Maxing out Your Budget and Forgetting the “Real” Cost of Ownership

A mortgage preapproval letter gives you an idea of what you could borrow, but it doesn’t include all of your costs of homeownership. That’s why it’s important to see the amount in your preapproval letter as a limit, not a goal. 

Many first-time homeowners underestimate what they’ll have to pay in property taxes, homeowner’s insurance, maintenance, utilities, and homeowner’s association (HOA) fees, which are common in Florida. When you have a mortgage, your property taxes, insurance, and HOA fees will be added to your monthly premiums, and your lender will pay them on your behalf. 

In addition to monthly mortgage payments, you’ll need to budget for home maintenance, utilities, and other costs. A general rule of thumb is to budget for home maintenance costs that are 1% to 3% of a home’s value.

When you close on a property, you’ll have to pay closing costs and fees, such as an inspection fee, appraisal fee, documentary stamp taxes, and title insurance. Fannie Mae has a Closing Costs Calculator that you can use to estimate your fees. You’ll also have moving expenses and the cost of buying any furniture or home furnishings you may need. 

Of course, if you’re buying a property that will be your primary residence, you’ll qualify for Florida’s homestead exemption, which can reduce your property’s taxable value and your property tax bill by about $500 to $1,500 per year. The median assessed value in Marion County is $275,600 with an annual tax payment of $2,012 according to SmartAsset.com.

Underestimating Florida Specific Costs (the Trap Out-Of-State Buyers Fall into)

People moving to central Florida from other parts of the country usually aren’t ready for the unique cost of homeownership in Marion County. Florida is the most expensive state in the country for homeowner’s insurance, according to Insurance.com, with an average price of $7,136 per year. This compares to a national average of $2,543 per year.

Your insurance will also have a separate deductible for wind and hail damage that is usually a percentage of the cost of repairs from this kind of damage. If your property received $10,000 in wind or hail damage from a storm and your wind and hail deductible is 2%, you would be responsible for paying the first $200 for repairs before your insurance would kick in. If your home is in a flood zone, your lender will require you to have flood insurance, which is not included in a standard homeowner’s insurance policy but is required for all federally backed mortgages. 

Your homeowner’s insurance could also have a separate deductible for hurricanes and named storms, which would be a percentage of your home’s insured value. For example, if your property’s value is $400,000 and you have a 5% storm deductible, you would be responsible for paying the first $20,000 for any repairs from storm damage. 

 

Waiving the Home Inspection (and Other Due Diligence Shortcuts)

When you bid on a property, your realtor will put together a sale contract that spells out the terms you’re offering the seller. It typically includes an inspection clause that requires the property to be approved for sale by a certified home inspector. 

This person will give the home a thorough examination and look for structural defects, building code violations, health hazards, and other issues. If the inspector finds something wrong, the inspection clause gives you the right to back out of the deal or renegotiate with the seller to either lower the price or have the repairs done before you go through with the sale.

It might be tempting to skip the inspection clause to lock in a sale or to save money but doing so could cost you a fortune. Imagine buying a home, only to discover that the roof needs to be replaced or there’s hazardous mold somewhere. A major defect could not only put your finances and your health at risk, it could also make it impossible for you to qualify for homeowner’s insurance unless it’s addressed. Even if a property is offered for sale “as is,” you can still (and should) require an inspection when you bid on a home. 

Other due diligence issues include:

 

• • • If you plan on renovations, additions, or a different use for the property (such as running a business out of the home), check for zoning or HOA restrictions to make sure it’s possible.
    • If the property is within an HOA, find out if it has any projects or special assessments planned. Get a copy of the HOA’s rules and restrictions.
    • Don’t skip title insurance. It covers you in case of ownership issues or liens placed on the property.
    • A mortgage qualification clause in your sale contract can protect you in case you fail to obtain a mortgage.

 

Letting Emotion Drive the Decision

One of the biggest homebuyer mistakes in Ocala and Marion County is to let your heart overrule your bank account. Some people focus on buying a “dream home,” wind up in a bidding war, and overpay for the property. Sometimes the home-buying process can take longer than they expected, so they make a quick decision just to get it over with. They might overlook a property’s red flags, such as major defects, that wind up costing them a fortune. That’s why it’s so important to make a calm, data-informed decision based on the help and advice from a local realtor who can help you find the right home at the right price.

Leaving Assistance and the Right Loan on the Table

There are state and federal programs that can help first-time homebuyers in Florida with their mortgages and down payments. The Florida Housing Finance Corporation (Florida Housing) offers several first-time homebuyer assistance programs in Florida. These include:

• • • A 30-year fixed-rate mortgage for first-time homebuyers. A minimum credit score of 640 is required. “First-time homebuyer” means you haven’t owned and occupied your primary residence for the past three years.
    • Florida Assist (FL Assist) offers up to $10,000 in down payment assistance as a no-interest loan. Repayment is deferred until you sell or transfer the home, refinance the property, or pay off your mortgage.
    • Florida Homeownership Loan Program (FL HLP) Second Mortgage offers $12,500 as a 3% fully-amortizing, second mortgage with a 30-year term. It requires a monthly payment, but the principal balance is deferred until you sell the home, refinance, or pay off your mortgage.
    • HFA Preferred and HFA Advantage PLUS Second Mortgage offers additional assistance for those participating in Florida Housing programs. Borrowers can receive 3% to 5% of their total loan amount as a forgivable second mortgage.
    • The Florida Hometown Heroes Housing Program offers down payment and closing cost assistance for those employed in healthcare, education, childcare, the court system, and public safety. Veterans and active service members are also eligible.

 

Of course, there are also loans available that are backed by the federal government:

The Federal Housing Administration (FHA) offers federally-backed mortgages for first-time homebuyers, seniors who are partially or fully on their home, and those buying a manufactured or mobile home. They’re typically used by those who have trouble qualifying for a conventional mortgage.

Mortgages backed by the Department of Veterans Affairs (VA) are available to veterans, current service members, and qualified surviving spouses. These VA home loans are available with no down payment or mortgage insurance, although you will need a Certificate of Eligibility (COA) from the VA to apply.

U.S. Department of Agriculture (USDA) home loans, also known as rural development loans, are available to low-income borrowers in certain rural areas. They do not require a down payment.

The Mistakes Unique to Buying Acreage, Farms, and Equestrian Property

Marion County and the Ocala area of Central Florida are known for having rural properties dedicated to agriculture and horse raising. These represent their own unique challenges and issues that you won’t find in the city. Fortunately, we have experience with equestrian and rural properties, so we can help you avoid common buying acreage in Florida mistakes.

For example, if a property doesn’t have road access it could be because it was subdivided from a larger parcel. You’ll need to make sure you have adequate access and easements so you can use your property as you intend.

 

Other potential issues include:

 

• • • Well and septic systems need to be approved by a qualified inspector.
    • Verifying that zoning would allow your intended use, such as horses or livestock.
    • Underestimating the cost of land maintenance.
    • Confirming that any fencing, barns, and other structures are within the property line.

 

The Biggest Mistake Of All: Going It Alone in an Unfamiliar Local Market

The best way to avoid common homebuying mistakes in Florida is to work with a local realtor who understands the Central Florida market and can help you find the right property in Ocala, Marion County, and Gainesville.

At Showcase Properties, we have decades of experience helping first-time homebuyers in Central Florida find the right property while avoiding costly mistakes. Please contact a Showcase agent for information on the local real estate market, check out our featured listings online.