MORTGAGE AVAILABILITY

With the correct guidance, getting a mortgage for a property in Florida is not normally a problem. You can even apply online in some cases!

Mortgages of up to 75% of the property value can usually be obtained by self-certification, which is a very straightforward process. Some brokers can give you a sliding scale range of choices depending on just how much documentation you can provide, but in general the more proof of past income and credit status you can provide … the lower your mortgage rate will be.

Larger mortgage percentages (smaller deposits) usually require proof not only of income, but of expenditure too – the lender gets more and more concerned about affordability at these levels.

MORTGAGE AFFORDABILITY

The broad affordability calculation is similar to that used in the UK, with most people allowed to borrow 3.5 times the first income plus the second income.

While those figures may be relevant if you are buying a primary residence based on income, bear in mind that the affordability of an investment mortgage is based on the realistic income potential of the property as much as on your own income.

Break even calculations for rental properties are typically based on a maximum 70% mortgage – any more and you require occupancy levels that are unrealistic in most cases.

PRE-APPROVED MORTGAGES

TA “pre-approved” mortgage means getting your mortgage approved in principle before you go looking for a property – and it’s a good idea to do this.

As well as giving you the confidence that you can afford to buy, the associated documentation will tell real estate brokers and their sellers that you are a serious buyer. In a business that works on commission and a fierce hierarchy of seniority within sales forces, this can open doors to levels of personal service and experience that isn’t available to you if you simply walk in off the street with an enquiry.

Getting your mortgage application pre-approved also saves time in completing the mortgage application when you find the property you want. This can be important as – if you remember – “time is of the essence” is fundamentally true with Florida contracts. This is no time for last-minute hiccups in getting your mortgage arranged!

Stay Approved
Bear in mind that pre-approval is granted conditionally, based on the facts at that time. The lender reserves the right to check those facts again at any time, and it isn’t unusual for them to run a second check immediately before closing.

So, you should be careful not to do anything between pre-approval and closing that seriously affects your credit-worthiness in the eyes of the lender.

Extra Debt. Taking on any additional debts will affect your debt to income ratio adversely – a major credit purchase like a car may raise a red flag on your credit report.

Stable Money. The balances of all your accounts are recorded during the pre-approval process. Large withdrawals (or deposits) in any of those accounts – or closing accounts – may raise a red flag.

Stable Employment. Moving to a regular salary job of equal or higher pay should be ok, but a drop in income – or any job move where some income is based on variables like commission or bonuses – may be a problem.

DOLLAR OR STERLING MORTGAGE?
As well as the interest rate that is built-in to your mortgage, the exchange rate between the pound and the dollar will have a bearing on the true cost of financing your home – unless of course you have moved completely to Florida and deal only in dollars.

Having an asset (your Florida home) that is valued in dollars while at least part of your income is in sterling will inevitably expose you to the vagaries of fluctuating exchange rates. Sometimes the pounds you get for renting the home to other UK residents will pay a lot of the mortgage, other times your dollar costs will seem more expensive when you have to transfer pounds to pay them.

It is virtually impossible to eliminate all possible currency risk for as long as you have an interest in both currencies, so any decision you make concerning mortgaging in dollars or sterling will at best influence the degree of that risk and whether you ride the fluctuations in exchange rates throughout the life of the mortgage – or roll up all your risk until you sell the house.

As a very general rule, you are likely to be better off with a US mortgage in dollars, but this is an area where you are well advised to consult with mortgage advisers who understand the needs of UK citizens mortgaging in Florida plus your personal circumstances.

ALL THE FEES

There are a large number of different fees payable in the process of “closing” (completing) on the purchase of property in Florida. These fees become due at different times and are payable to different people, so there is a lot of potential for confusion – and for buyers to misunderstand the full costs involved.

Good Faith Estimates

Fortunately, there are programs in place in the USA to clarify this confusion and to promote “truth in lending”. When shopping for a mortgage, you should ensure you are given a “fully disclosed Good Faith Estimate” and/or a HUD-1 disclosure. The HUD-1 is the more formal of these (HUD is the Department of Housing and Urban Development) and there are some providers who will omit some closing fees from their “good faith” estimates so they can show a lower overall price.

You must be aware that the exclusion of these fees from an estimate will not prevent them being charged at closing, so make sure that your estimates include all the fees below – or an explanation for their omission.