Some readers have reported that getting a mortgage in Florida is tricky. But here an expert, Zoe Attwood from Orlando based Homes of America Realty Group, provides some answers to 18 of the most frequently asked questions.
1) Can a non-American buyer get a mortgage in Florida?
Yes. There are a number of lenders who will assist foreign national buyers with financing. Try to use a mortgage broker who is based in Florida as they will know the local market better.
2) Is there a minimum mortgage amount?
Yes. Most lenders have a minimum mortgage amount for foreign investors of $100,000. Some lenders can lend as low as $75,000 on a case by case basis.
3) Do the lenders prefer a house instead of a condo?
Most lenders prefer a house. However, some lenders will lend on a condo again on a case by case basis.
4) Is there an age restriction for obtaining a mortgage?
No. In the USA there is no age restriction for obtaining a mortgage. Ageism is illegal in Florida.
5) Over how long can a mortgage be taken?
Most foreign national mortgages are calculated over 30 years. This means that the mortgage payment is as low as possible. Depending upon the type of mortgage, most lenders will accept overpayments without penalty.
6) Can I pay off my mortgage early or upon the sale of the property without penalty?
In short, yes
7) What down payment (deposit) is required?
Depending upon the use of the property, the minimum deposit can vary from 25% to 30%. If the property is situated in a residential area and will not be rented out, some lenders will accept a 25%. If the property is going to be rented out to holidaymakers, most lenders require a 30% deposit.
8) What are the interest rates?
Much depends on the amount of the down payment. With a 30% down payment, the interest rate at the time of writing will be around 6%. With a greater down payment, the interest rate will drop. For example, with a 40% down payment, the interest rate will be less than 6%.
9) What documentation is required?
For the lower interest rates, the US lenders will generally require borrowers to prove their income for at least two years, prove their down payment, produce a domestic international credit report and demonstrate their domestic housing expenses.
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10) What mortgage options are there?
There are a range of options. A typical foreign national mortgage is similar to a domestic mortgage. The borrower will be expected to prove their income, assets and liabilities. A foreign national mortgage will have typically a slighter higher interest rate than a domestic mortgage.
Some lenders offer no-income mortgages and so there is no requirement for borrowers to prove their income. Others offer a no-document mortgage which means that the borrowers just have to produce their passport and a bank statement showing they have their deposit and closing costs.
Most mortgages are amortized repayment mortgages. Some lenders offer interest-only mortgages.
11) What are the costs?
The legal costs for a cash or mortgage buyer are generally $500-700 but as a general rule using a mortgage facility, the closing costs will rise and be approximately 5% of the purchase price. This includes all title fees, searches, registration fees and lender fees. It can also include a lot of pre-payment items such as insurance, HOA fees and property taxes which can save you in the long run.
12) How long does the process take?
It is much quicker than you might think. From the point that a purchase agreement is signed to closing the deal, the process can take approximately 60 days. Depending on how quickly documents can be provided and the property appraisal takes, it is possible to shorten this timeframe to around 45 days.
13) Does the borrower need to be present in Florida throughout the process?
The application form can be completed remotely wherever you live and submitted online. Depending upon the lender, it is possible for the borrower to not have to travel to Florida to close. For a UK borrower, some lenders will allow the borrower to sign the closing paperwork before a UK notary. The signed documents will then need to be mailed back to the title company before closing can take place.
14) Does the borrower need to open a bank account in Florida?
Yes. The lenders will want to see that the borrower has a bank account in the US. Primarily, this is where the mortgage payments will be made from. In addition, the utility bills will be paid from this account.
15) Is there a requirement to keep money on deposit in the USA?
No. Depending upon the type of mortgage selected, some lenders require the borrower to show they have at least 12 months of mortgage payments in reserve. These funds may not need to be transferred to the US.
16) Can a borrower arrange their own mortgage in Florida?
Yes. There are a number of retail lenders who will deal directly with a borrower. However, this is a very complicated process. Using a mortgage broker who has access to multiple lenders and multiple types of mortgages is beneficial. Not every mortgage is suitable for every borrower. A broker will be able to secure a customized mortgage and provide valuable guidance throughout the process to ensure the most suitable mortgage over the length of your ownership.
17) What are the advantages to taking a mortgage in Florida?
A mortgage is a tool for the investor to use when renting and the rental income goes to offset paying the mortgage and the operational costs. The facility of a mortgage can also help those with limited funds who would prefer to use cash, by allowing them to purchase a more expensive home that would bring a much higher rental income again to offset the mortgage payments. Remember a mortgage at a 33% deposit on the home still receives any equity rise on the full 100% value of the home i.e using someone else’s money to work to your benefit. There are also tax offset benefits to having a Florida mortgage which will help to reduce your outgoings on a property and you can circumvent any changes in the exchange rate by buying in US dollars.
18) What do you need to make an offer on a Florida home using a Florida mortgage?
The offer needs to be accompanied by a letter of prequalification. It is very easy to be pre-qualified.