The home buying process can seem overwhelming, especially for new buyers.
We created this page to help take the mystery out of home buying. It only skims the surface of the buying process, providing a quick overview. Most topics have links to more information.
For detailed information on the entire buying process, check out our RESOURCES section.
WHERE TO LIVE?
Not sure where you want to live? Buyers can narrow down the part of town they want to live using online resources.
With YELLOW, links to all these resources can be found on every listing’s page.
A good first step in determining where to live is your travel time. This could be from anyplace that is important to you - your workplace, a child’s school, the ocean, whatever.
A mapping service we like is called TravelTime. Enter a location, select the driving time in five-minute increments, and select your method of travel (it defaults to Public Transport). You can even set your time of day (it defaults to “Now”).
It’s a fun tool to play with.
Buyers can learn more about an area from its demographics, which includes things like the average age, income, education, race, etc.
City-Data.com is a great resource with loads of information on practically every city and community.
The link below will take you to the Florida City-Data.com page. From there you can click on any city for more info (click the "Filter cities" box in the upper-left to find smaller cities).
The Census Bureau has loads of information available on demographics.
In the link below you will have to enter the zip code in the search box for your specific area.
An interesting racial demographics tool comes from the Esri Demographics Team. They've created a map using 2020 Census data to break down the ethnicity of the entire country, narrowed down to the local level.
In the link below you'll first see the racial demographics for your current location. You can zoom and pan the map to change its location. Show or hide the legend by clicking the button in the lower-right of the map that looks like a computer monitor.
City-Data.com also has extensive community forums with a load of questions, answers, and comments about an area.
The link below will take you to the Florida forums page. From there you must click on a large city or region, but you are then able to do a search for a town or area within that region ("Search this Forum" in the upper-right).
The two links below will provide more information on the schools in an area:
Here are a few online resources that show crime in an area:
This is important. You need to know if a home is in a flood zone since it will affect your insurance. You can find the flood status of an area here (give the map extra time to load the flood data layer):
FINDING A “HOT” AREA
Retail companies have teams of professionals who do nothing but scour areas to find hot and up-and-coming spots for their stores. Researchers have identified several companies that have a knack for finding these hot spots, including:
- Whole Foods
- Trader Joe's
Homes near these retailers have seen their prices rise more than more than overall market. Look for these retailers to find a "hot" area.
Our RESOURCES section has more information on finding a home.
WHAT CAN YOU AFFORD?
Don't look for a home yet until you know what you can afford. This section will help with that.
FINANCIAL PROGRAMS FOR FIRST TIME HOMEBUYERS
First time homebuyers (defined as someone who hasn’t owned a home in two years) have many helpful options available to them. Learn more from the links below.
BASED ON YOUR ANNUAL SALARY
Some experts suggest a spending limit of three times your salary for a home (if your income is $60,000, look for homes around $180,000). Other experts suggest only two times your salary. Historically, the magic number has been around 2.6 times your income.
This can be tough to accomplish in today's market. According to the BLS, the median salary in 2022 was just over $54,000. HUD says the median home price was $468,000 at the end of 2022 (it was $327,000 at the end of 2019). Obviously there is a disconnect here.
Be careful combining finances with another person to buy a home.
It’s not uncommon to see a breakdown in the relationship and one person may leave. Can your lifestyle be afforded on one income?
For a different look at what you can afford, determine what monthly payment you could safely handle.
BASED ON MONTHLY PAYMENTS
Another way to look at what you can afford is the monthly payment. Your home payment should be around 25% of your take home pay (that means after taxes, too).
Someone earning $60,000 a year would make roughly $4000 a month in take-home pay (give-or-take with taxes). At 25%, your monthly payment would be around $1000. That means you can afford a home around $150,000.
There's a lot of variability in those numbers, so try different calculators to give you a good range to consider.
When you apply for a mortgage, the lender will look at your monthly income and compare it to the monthly cost of the home and all your other debts.
There are two main ratios lenders look at: Housing Expense Ratio and Debt-To-Income Ratio.
HOUSING EXPENSE RATIO
Compares housing expenses to pre-tax income
Most traditional lenders want a ratio under 28%, but loans backed by Fannie Mae and Freddie Mac will accept a ratio as high as 31%.
HOUSING EXPENSE RATIO
Take your monthly PRE-tax income and divide it by the cost of the housing payment. In the housing payment amount, be sure to include taxes, insurance, association fees, and PMI.
Goal: Under 28%.
DEBT TO INCOME RATIO
Compares housing expenses AND other monthly expenses to pre-tax income
Most traditional lenders want a ratio under 36%, but loans backed by Fannie Mae and Freddie Mac will accept a ratio as high as 43%.
DEBT TO INCOME RATIO
Take your monthly PRE-tax income and divide it by the cost of a housing payment (including taxes, insurance, association fees, and PMI) PLUS other monthly debt payments like credit cards, car loans, student loans, and even child support.
Goal: Under 36%.
GET A PREAPPROVAL
A mortgage preapproval will give you a specific number for what you can afford. It comes from a lender who does a quick analysis of your finances.
We recommend getting a mortgage preapproval so you can see exactly what you can afford. The mortgage company can also recommend a mortgage type that would work best for you.
Below we'll quickly touch on a few things to know about mortgages.
Most people finance the purchase of a home and that means getting a mortgage. A very important step in getting that mortgage can be done immediately: do not make any changes to your financial situation!
Lenders will soon be combing over your financial life and they want to see consistent income and spending habits.
For at least three months before applying for a mortgage (and until closing):
Learn more about what lenders will look at in our RESOURCES section:
Home buyers must find a mortgage lender – financing a home purchase is not something a real estate company or agent can do, so buyers must reach out to lenders.
We suggest reaching out to your current bank or credit union first, especially if they are larger banking institutions. The loan consultants with the bank have a wealth of information on loan types and can help determine the best loan for you.
That doesn't mean you have to use them for your mortgage!
You’ll want to first get a preapproval from your current bank. You’ll formally apply for a mortgage once your offer on a home is accepted. At that time, we recommend shopping around.
Learn more about mortgages and lenders in our RESOURCES section:
GET A PREAPPROVAL
Your bank can preapprove you for a mortgage, which is easier since you already have a relationship with them.
Getting a preapproval is a fairly straightforward process where you submit some basic info on your financial situation. It's not nearly as involved as applying for the actual mortgage. A preapproval response may take as long as a few minutes with an online lender to a day or two with a traditional lender.
Learn more about preapprovals in our RESOURCES section:
It's important to start saving early – not only for your down payment, but also for closing costs that can run from 2-5% of your loan amount. Note that by using YELLOW, you’ll save the 6% real estate agent fee that’s built into the cost of the home.
Lenders ideally want a down payment of at least 20% of the home’s sale price. However, it’s possible to go as low as 3% with some mortgage programs (and 0% with a VA loan).
Loans with less than 20% down will have additional costs like PMI. These mortgages can take longer to close and have a higher chance of not closing, so some sellers may be reluctant to sell to a buyer with a low down payment.
Learn more about closing costs in our RESOUCES section.
FINDING THE HOME
Once you know the area you’d like to live and how much you can afford, you can start looking for the right home.
Every real estate website offers a search map to find a home, but YELLOW offers more. Not only can you find a home from the map, but you’ll also learn much more about the property.
Every property on YELLOW has had the home inspection completed and posted right on the listing. You’ll also see a price analysis so you’ll see how the listing price was determined. Plus, you’ll see a video review of the property completed by us.
This level of transparency is something that can't be found anywhere else.
VISIT THE HOME
On the listing page for every home, you'll see the option to "Visit Property" where you can request an appointment time.
BUYERS MUST BE QUALIFIED
Important note: To visit a property, you must submit your financing preapproval and ID. You will only be able to visit the property if your preapproval is above a level set by the seller, which is usually slightly below the listing price. This is for the safety of the seller.
For example, say a seller lists their home for $200,000. They can specify that they only want buyers preapproved for $180,000 or more to visit their home.
We'll verify the time you select with the homeowner and get back to you as soon as possible. If that time is unavailable, we'll suggest another time to you for a visit.
With YELLOW, you're able to see guided tours of a home using the video function on your phone.
We’ll create a video portal between you and the seller, so the seller can communicate with you as they walk through your home.
Buyers can safely visit a property on their or or with their agent. Most homes on YELLOW have a digital key lockbox, where visitors enter a unique, temporary code to get access to the door key.
Learn more about showings with YELLOW in our RESOURCES section:
MAKING THE OFFER
YELLOW makes it easy to determine your offer.
Every home has a price estimate with an explanation on how that estimate was reached. Other features like the home inspection provide transparency so there aren’t any surprises.
Knowing this information helps you safely make an offer.
MORE THAN A SALE PRICE
The offer isn't just the sale price, though. You'll need to know what size escrow deposit you'll make, the mortgage details and down payment, and timeline.
Our suggestion – talk with your mortgage provider first. They'll suggest a price you can comfortably offer. They’ll also help with the amount of the down payment, the earnest money, the mortgage type, the rate, and most importantly, how long they expect it will take to close.
Learn more about determining your offer here:
MAKING AN OFFER ON YELLOW
It’s easy to make an offer on homes listed with YELLOW. The entire offer is made online and sent directly to the seller. The seller is able to counter your offer and the process can continue as long as you wish.
The offer is also completed on downloadable Florida Realtor contracts, which you can keep for your own records.
Learn more about making the offer in our RESOURCES section:
It could take several weeks before actually closing, depending on your source of funding. The average closing date is about 45 days after the offer is accepted.
You will officially apply for the mortgage once the offer on the home is accepted. You already have a mortgage preapproval from one lender, but now you can shop around for better mortgage terms.
HOW TO CLOSE FASTER
The biggest determinant in how quickly your loan closes is YOU. You can speed up the process by quickly responding to calls or email requests from the mortgage company. You’ll hear from them often, so be sure to stay on the ball. The longer you take, the longer it will take to close on your loan and home.
The application for the mortgage will be much more intensive than the pre-approval. The mortgage underwriter will request and review more financial documents and verify that the property meets certain requirements.
Learn more about the mortgage and the financial documents you will need to produce.
The closing period is often called the “due diligence period” since it’s during this time you’ll do more due diligence on the home.
A home inspection has been completed on every home on YELLOW, but buyers are free to complete their own. Additional inspections include a septic inspection if the home has a septic system. There’s also the WDO Inspection (or termite inspection) that is requested by your lender.
Lenders will require you to have an appraisal completed on the home. They want to make sure the money they are lending isn't more than what the home is worth.
An appraisal is a far more detailed and accurate price analysis than the estimate YELLOW has completed.
The appraiser will produce a report that shows the fair market value of the home by comparing it to recently sold homes in the neighborhood.
Every lender requires you to have homeowners insurance.
If you currently own a home, you can call your agency and let them know you’re buying a new home. They will handle writing a new policy.
If you don’t have an insurance agent, you have many options.
It’s possible you found a great home, but it’s located in a flood zone. You’ll have to get insurance for that, too. Unfortunately, insurance to cover this risk is not typically provided in a homeowners policy so it must be purchased separately.
During the closing process you’ll be introduced to the title company. They are the ones who actually complete the home sale – they do the legal paperwork, hold funds, and get everything finalized (not the real estate agent!).
As their name describes, the title company will also research the title of the home. They make sure it can be legally sold and bought, since sometimes legal situations can arise and prevent a sale.
Your lender will also require buyers to get Title Insurance. This covers the lender up to the amount of the loan in the event that any problems arise with the home’s title after financing.
The seller will pay for a title search to ensure there are no issues with the title. They will also pay for a separate owner’s title insurance policy as protection for the homebuyer in case a title problem arises in the future. It is issued for the amount you paid for the home.
Your lender usually arranges the closing and makes sure that the closing agent has all the necessary documents in place. Traditional closings usually take place at the title or escrow company, but can sometimes take place at an attorney’s office.
However, the title service recommended by YELLOW provides remote closings, so you may not have to travel anywhere to close.
Here’s what happens at closing:
Learn more about closings in our RESOURCES section: