Some think that buying a Miami Beach home is impossible for most buyers due to the expense and lending hoops. It can seem like a daunting task to many first time home buyers. The good news is that we can find many affordable options in and around Miami Beach.
Affordability is a matter of opinion, but I have seen many buyers find great options in the city. Now, if you want a sprawling huge home and lots of land on a budget, you are going to have to venture out to the burbs. On the other hand, if location is important to you and you can compromise a little here and there, finding a great affordable Miami Beach home may be an option.
We have found that there are a lot of misconceptions about buying a property, and these misunderstandings can lead to a long hard road of navigating the home buying process. Many first time homebuyers, because their budget and resources “seem low”, try to skip over the critical initial steps of the buying process and also attempt to do a lot of DIY which creates a lot of havoc on a process that doesn’t even need to be.
One of the biggest obstacles that we see is understanding the mortgage process. Many buyers in Miami have heard that we are an “all cash” market or that there are large down payments required, so they think they cannot buy a property. This is not true.
The thing is, for condominiums, we are a heavy cash market and if you need financing often large down payments are required. But that’s for condos, not single family homes. The lending process is much easier on a single family home than on a condominium.
For instance, with a single family home purchase, we have had buyers purchase properties with as little down as 0%, 3.5% and 5% down. These down payments vary based on many different factors but there are programs out there for qualified buyers. (
A recent study by Fannie Mae, What Do Consumers Know About The Mortgage Qualification Criteria?revealed that many consumers are either unsure or misinformed regarding the minimum requirements necessary to obtain a mortgage.
Let’s break down three such challenges.
Down Payment
Perceptions
Many renters have mentioned that the lack of an adequate down payment is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:
- 40% of all renters don’t know what down payment is required
- 15% think you need at least 20% down
- An additional 4% think you need at least 10% down
The Reality
There are programs offered by Fannie Mae, Freddie Mac and FHA that require as little as 3-3.5% down. VA and USDA loans offer 0% down programs. According to the National Association of Realtors, the typical down payment for a first-time buyer is 6%.
Credit Score
Perceptions
Many renters have mentioned that the lack of an adequate credit score is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:
- 54% of all renters don’t know what credit score is required
- 5% think you need at least a 740 credit score
The Reality
Many mortgages are granted to purchasers with a credit score of less than 700. According to Ellie Mae, the average credit score on a closed FHA purchase is 687 and the average credit score on all loans is 722.
Back End Debt-to-Income Ratio (DTI)
Perceptions
Many renters have mentioned that they carry too much debt that is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:
- 59% of all renters don’t know what DTI is acceptable
- 25% think you need at under 25%
- 7% think you need under 39%
The Reality
Lenders like to see a back-end ratio that does not exceed 36%. Fannie Mae’s maximum total DTI ratio is 36% of the borrower’s stable monthly income. The maximum can be exceeded up to 45% based on credit score and other requirements.
Bottom Line When Thinking About Buying a Miami Beach Home
Don’t let a lack of knowledge or misinformation keep you from buying a home. It doesn’t cost anything to speak to a local Realtor and lender so you can get a good idea about your buying power. Also, make sure you go about the process correctly, especially if you are a first-time buyer. Don’t get caught up in the DIY process of buying a home, it can cost you a lot of money and time in the long run if you don’t know what you are doing.
Who knows, you may be able to buy a home now? Don’t let rumors and bad information guide you about buying a Miami Beach home.
