Tag Archives for " Florida "

Mortgage Tips for Snowbirds

Flying South

Snowbird mortgage rules are the same for anyone looking to finance a vacation home, unless the borrower resides outside the U.S. In the latter case, there are more onerous foreign national mortgage regulations, a higher interest rate would apply, and there are several title, estate planning, legal and tax issues which would need to be carefully considered. Given today’s exchange rate [CAD$1.00 = US$0.76], Canadians would do well to obtain a mortgage from a U.S. lender – preferably one affiliated with their Canadian bank (for relationship, credit history and funds transfer purposes).  

But here are a few thoughts for those who are able to qualify for a conventional mortgage for the purchase of a property in the sunny South:

  1. Whether a condo or single-family home, call it a second or vacation home – not an investment property (rent it later, if necessary) - you can borrow up to 90% of value (vs 85% for a rental) and avoid a risk adjustment charge of 2.125% to 4.125% of the loan amount, depending on your credit score.
  2. Get your credit score to 740. Otherwise, depending on your down payment, another 1.125% to 3.250% risk charge could apply.
  3. Get a reliable pre-qualification letter. You don’t want to find out just before closing that your debt-to-income ratio (including mortgage obligations of all properties owned) exceeds the maximum lender threshold.
  4. Understand the costs, and then budget accordingly. There will likely be unexpected repairs, improvements, HOA/property management fees, travel costs, etc.


Here’s the Point: Snowbirds could save a bundle of money by doing a little homework before financing a Florida home purchase.

Declined Again? Don’t Give Up!

It’s been two weeks since your lender told you: “Your loan approval is coming any day now”. Guess what – you have a problem!

Yet you were told your credit score is acceptable, your debt-to-income ratio is comfortably below 43%, and your savings will satisfy the down payment, reserve and closing cost requirements…

Don't give up

Well, unfortunately it didn’t register with your lending officer that you are renting the home you are buying, and that in lieu of rent you are paying for utilities and capital improvements (plus you paid cash for almost all of your housing expenses, and do not have much of a checking account paper trail). And, by the way, the landlord is in default with her lender who is about to foreclose on the home you want to purchase! [Yes, this is a real example]

Without proper explanation, the ultimate buyer of your loan (Fannie Mae) would most definitely conclude that you do not have an arm’s length or independent relationship with your landlord. More importantly, this loan will require too much effort for most lenders, especially if you do not have an established working relationship with them.

By: (i) properly and clearly documenting your receipts, (ii) demonstrating the legality and reasonability of your tenancy, (iii) evidencing proof of your residency, and (iv) ensuring you have an adequate letter of explanation acknowledged by yourself and your landlord, you should be able to get the loan – and avoid having to move your family elsewhere.

Here’s the Point: Lenders are always looking to increase their market share – not by compromising their principles, but by prudently underwriting a well-presented and well-documented loan request.

Flippers Beware!

Let’s say you buy a residential investment property for $150,000 using cash.  You fully expect to get a renter, but first need to make some improvements to the property.  So, being as smart as you are, you postpone financing the property because you should undoubtedly be able to get higher loan proceeds after you enhance value to $200,000 – right?caution Most lenders will not advance more than 75% of the original purchase price for the “Cash-Out Refinancing” of investment properties – until at least 12 months after the purchase.  This means that you cannot get a loan based on value during that time frame, unless you obtain the loan from a “portfolio” lender (a lender who can maintain the loan on their own books without either selling it to FNMA or having it guaranteed by FHA).  Nothing wrong with getting a portfolio loan, but they are oftentimes more expensive.

The government enforced this idea in order to prevent the flipping of homes.  Before the housing crisis, investors were bidding up the price of homes via quick cash closings, only to turn around and either quickly selling for a higher price or financing virtually 100% of the price right after closing (there were several lending programs that made it easy for them to do so).  Thus, the government wanted to prevent NON-owner occupant borrowers from continuing the same flipping practices – mainly in order to avoid purchasing or guaranteeing a loan secured by properties with inflated values.

Here’s the Point: Lenders take precautions to not lend against values that could be inflated. Within the first 12 months from a residential cash purchase, non-owner occupied investors/borrowers are generally restricted to a 75% LTV cash-out refi ratio based on the LOWER of original purchase price and value.

The Art of Investing (Part 2)

Art Espinoza recently asked me to return to his radio show entitled “The Art of Investing”.  Art is a respected financial advisor and wealth manager with offices in Vero Beach, Florida and Brookfield, Wisconsin, and his show airs every Saturday at 9:30 am on WAXE 107.9FM and 1370AM, or on iHeart Radio.

Here’s the Point: Listen to the following audio clip in which we debate a variety of topics including real estate trends in Vero Beach and in Florida, current demand for mortgages, liquidity in the financial markets, and the direction of interest rates:

The Art of Investing

I recently had the pleasure of apArt of Investingpearing on a radio show entitled “The Art of Investing”, hosted by Art Espinoza. Having known Art for quite some time in the Vero Beach community along the Treasure Coast of Florida, he asked me to discuss what’s happening in the real estate market, who the primary borrowers of real estate capital are, where I see interest rates going, and a variety of other related topics.

Art has been a respected financial advisor and wealth manager for 28 years, and has offices in Vero Beach, Florida and Brookfield, Wisconsin. His show, “The Art of Investing”, is broadcast every Saturday morning at 9:30 am on WAXE 107.9FM and 1370AM, or on iHeart Radio: http://www.iheart.com/live/WAXE-1079-FM-1370-AM-4788/

Art kindly asked me to make regular appearances on his program, and I look forward to sharing real estate industry dialogue and exchanging topical ideas with listeners in the future.

Here’s the Point: Click HERE to listen to our discussion of what’s currently happening in the Florida economy with respect to commercial and residential real estate activity and interest rates.