Everything You Need to Know About Financing

Financing

If you are considering buying a home in South Florida, whether as an investment, vacation home, or permanent residence, it is important to consider your options for obtaining a mortgage loan. There are many financial institutions that offer loans, from local banks, online financial institutions, private lenders, to large financial institutions in the United States.

Factors Influencing Initial Payment, Terms, and Interest Rates

• Nationality
• Legal status in the United States
• Credit history in the country
• Income and bank accounts

Obtaining a Mortgage

In South Florida, about 52% of buyers typically pay in cash, making the process much easier and faster. However, with mortgage rates being so low (ranging between 4.5% - 6%) compared to those in their home countries, many opt to finance their purchase.

Requirements to Obtain a Mortgage

1. Depending on the buyer's nationality, a visa is required. Any foreign buyer will need to present a copy of their passport with a valid tourist visa (B-1 or B-2).
2. At least 20% - 30% of the property's value as a down payment for "Houses".
3. At least 30% - 50% of the property's value as a down payment for "Condominiums and Townhouses".
4. Proof of income:
1. Bank statements
2. Reference letters from your banking or credit institution
3. Two forms of identification

Other Common Requirements

• Social Security Number
• Tax returns
• W2 form
• Bank statements for the last 6 months
• Proof of employment
• Residency for the last 2 years
• Personal balance sheet

Loan Costs

The costs of obtaining a loan vary from one institution to another and depending on the use of a mortgage broker. Here are some guidelines:

• Direct with a local bank: Typically cheaper, but limited to that institution's specific products.
• Using a mortgage broker: Very common, and despite generally having a higher cost than going directly to a financial institution, it offers a much broader range of options.
• Interest rates vary, among other things, based on credit history, monthly income, debts, and bank accounts. For clients without established credit, interest rates are generally higher.
• Down Payment Variations
  • Type of property
    • House/Single-Family Home: Lowest down payment (10% - 20%)
    • Townhouses: Higher than houses (20% - 30%)
    • Condominiums: Highest down payment (40% - 50%)

• Nationality:
• Foreigners without established credit in the USA are generally required a minimum of 30% down payment, increasing depending on the property type.

What to Do Before Applying for a Loan

• Get your credit report BEFORE applying for the loan to have time to correct errors or issues in the history.
• Know how much you can put down (including closing costs).
• Look for the best interest rate BUT consider the other terms of the loan.
• Compare estimates.
• Request a "good faith estimate".

What Not to Do Before Applying for a Loan

• Make major purchases on credit.
• Move significant money from accounts.
• Apply for any type of loan (car, boat, credit cards, etc.).
• Change your primary residence.
• Open or close bank accounts.

How to Estimate the Total Monthly Payment When Financing a Property

The most important monthly expenses to calculate the total amount to pay are:

• Mortgage
• Insurance (flood, hazard, hurricane)
• Third-party insurance (optional)
• Condominium/maintenance fees (homeowners association)
• Property taxes

Enrique Vicente Urdaneta

Real Estate Advisor | eXp Realty | EVU Luxury Homes

305.209.6418

[email protected]

www.evuluxuryhomes.com

www.instagram.com/evuluxuryhomes

Disclaimer: The information presented in this article is intended to provide a general understanding of the topic. However, please note that I am a real estate agent, not a lawyer, accountant, tax, or financial advisor. This content should not be taken as legal, tax, accounting, or financial advice. The laws and regulations related to this topic can be complex and may change or expand in the future. Therefore, it is crucial to consult with a qualified professional, such as a specialized financial or tax advisor, before making any decision based on this information. As a real estate agent, I can provide various options and professional guidance related to the real estate aspects of your investment strategy, and for matters related to tax implications, legal issues, and financial planning, please consult with the appropriate professionals, which whom I have allies I can refer.