The next step is to think about how you are going to purchase the home of your dreams. Again like Realtors, to offer mortgage information you also have to be licensed. Buying a residential property in Florida is much like buying a residential property in the UK. The one main difference is a crucial one – Mortgage Brokers charge for their services in Florida.
It is a good idea to get started with this straight away so that when you come to Florida you are all set to go – you have already sent all the required paperwork in to the mortgage broker and have qualified for a mortgage. This will save you time and energy and allow you to use your time more profitably viewing homes. If this is all sorted out before you come then you know how much you can afford to spend on your home and you are in place to buy. It also means if you see something you like, you can move on it straight away.
Typically for a foreign national buyer mortgages are available in the US with 20% to 25% down. You may also want to consider a UK mortgage these are now being offered by the larger banks and building societies for US homes. There are pro’s and con’s to each scenario and your mortgage broker is the best person to advise you on this.
Mortgage Interest rates are comparable to Europe. You can also get mortgages here for 30+ years at fixed or variable rates. Monthly Payments on a typical 30-year fixed rate loan do not alter and this is the most popular method of financing amongst Foreign Investors. In order to qualify, you must provide the usual details on employment and annual income. A credit check may also be undertaken by a European based firm. Non Status loans are the easiest to obtain however the deposit requirement and interest rate is usually slightly higher.
Mortgage Brokers in the UK are paid either a salary and/or a commission by the lender, the bank or building society. In Florida the Mortgage Broker is paid a fee by the borrower (you) in addition to a lender commission.
The costs incurred by you, the borrower, are collectively called the closing costs. There are a number of fees and charges that make up the closing costs . These costs are paid at the en d forming part of the closing costs, Mortgage Brokers charge a loan origination fee. This fee can range in size from 1 to 10% of the actual loan amount, depending on the complexity of the case (10% is the legal maximum loan origination fee permissible). UK residents, with a healthy deposit (20% and upwards), should not be charged anywhere near these higher rates. The most commonly charged fees will be in the region of 2 to 3%. Also, please be aware of Mortgage Brokers who claim there are “no closing costs” these costs are generally hidden elsewhere.
If you can bring this documentation with you it will speed the process up:
Passport and proof of UK address x 2
Proof of income: Employed - last 3 months pay slips, P60, bank statements Self Employed - last 2 years certified accounts, bank statements
Raising Finance
Many people raise finance for an overseas property, by refinancing their UK Property. Using the new Intelligent Finance Accounts (offered by such companies as Virgin and the Woolwich – part of Barclays) has become a very economical way of raising the deposit for your property in the US. You can also use this for additional funds for the costs you incur such as your property taxes & legal fees etc. Even a small mortgage is a good idea because in the US you can offset your property taxes (rates/local council taxes) and the interest paid on the principal or your mortgage payment against your income tax.
Mortgage Terms Explained
Loan Origination FeeThis covers the administrative expenses in setting-up and processing the loan. The loan origination fee may be a percentage of the mortgage amount.
Points (optional) An option for the home buyer is to pay points to lower the interest rate at which the loan will be repaid. Each point equals 1 percent of the mortgage amount. For example: on a $150,000 loan, 1 point would equal $1,500.
Appraisal FeeThe fee for having the house appraised may be incorporated into the closing costs or payment may be required by the lender at the time the loan application is submitted.
Credit Report The lender uses a credit report to determine the creditworthiness of the loan applicant. This fee is often paid when the loan application is submitted.
Interest PaymentTypically the buyer is required to pay interest on the mortgage loan to cover the time between the closing date and when the first mortgage payment period begins. For example: If closing is on May 15. Your first monthly payment begins to accrue interest on June 1 with your first mortgage payment due July 1. At closing an interest payment covering the accrual period between May 15 and May 31 may be required.
Scoring your Credit - How's your FICO?
In today's increasingly automated society, it should come as no surprise that when you apply for a mortgage, your ability to pay can be reduced to a single number. All the years you've been paying your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
All three of the major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The best known is called the FICO score, based on a model developed by Fair Isaac and Company (hence the name) and used by Experian. Equifax's model is called BEACON, while TransUnion uses EMPIRICA. While each of the models considers a range of data available in your credit report, the primary factors are:
Credit History - How long have you had credit?
Payment History - Do you pay your bills on time?
Credit Card Balances - How much do you owe on how many accounts?
Credit Inquiries - How many times have you had your credit checked?
Each of these, and other items, are assigned a value and a weight. The results are added up and distilled into a single number. FICO scores range from 300 to 800, with higher being better. Typical home buyers likely find their scores falling between 600 and 800.
FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.
What can you do about your FICO score? Unfortunately, not much. Since the score is based on a lifetime of credit history, it is difficult to make a significant change in the number with quick fixes. The most important thing is to know your FICO score and to ensure that your credit history is correct. Conveniently, Fair Isaac has created a web site (www.myFICO.com) that let's you do just that. For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. Also available is some helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score. Each of the credit services offers similar services on their web sites: www.equifax.com, www.experian.com, and www.transunion.com.
Armed with this information, you will be a more informed consumer and better positioned to obtain the most favorable mortgage available to you.
The Cost of Your Mortgage Loan
Money Isn't Everything
When considering lenders, factor in the level of service they will provide throughout the loan process. I'll be glad to provide a list of lenders who have successfully helped clients in the past. I also suggest that you ask friends and family in the area for their recommendations.
The same care and consideration you give to finding the right house should be applied to your search for the right mortgage lender. For most home-buyers a major determining factor in selecting a lender is the cost of the mortgage loan. But how do you determine the cost of a mortgage loan?
Shopping for a Mortgage Loan
While most buyers concentrate on interest rates, it is best to look at all the costs associated with a mortgage loan. Mortgage loans include the quoted interest rate, points and closing costs.
More than Just Interest
A number of fees are associated with the mortgage loan, including:
Appraisal - A carefully documented opinion of value by a licensed, professional appraiser.
Credit Report - A detailed report of your credit, employment and residence history prepared by a credit bureau.
Principal - The amount owed on a mortgage which does not include interest or other fees.
Document Fees, Loan Fees and Processing Fees - Miscellaneous fees charged by the lender.
Discount Points - Points paid in addition to the loan origination fee to get a lower interest rate. (1 point = 1 percent of loan amount)
Origination Points - the total number of points paid by the borrower at closing. (1 point = 1 percent of loan amount)
InterestRate - A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.
Prepayment Penalty Mortgages (PPMs)
These loans restrict your right to prepay part or all of the principal in the loans early years. A prepayment fee is charged by the lender to the borrower who wishes to pay part or all of the loan ahead of the regular schedule. The advantage of a PPM is that they often have a lower interest rate than other mortgages.
Using the Annual Percentage Rate (APR) to Compare Mortgage Loans
The APR was designed to help borrowers understand the relative costs of a mortgage loan. The APR takes into account the various fees associated with the loan, which is why it is often higher than the interest rate. Understand that not all lenders calculate a loan's APR in the same way. That is why this should be only one of the factors used in selecting the best mortgage for you.
Locking-in Interest Rates
Another factor to consider when selecting a lender is whether the lender will lock-in the mortgage's interest rate and points. Click here to learn more about lock-in options.
The Down Payment
The amount you have available for a down payment will affect what types of loans for which you can qualify. Down payments typically range from 3 to 20 percent of the sales price for the property.
Tips for Accumulating a Down Payment
Save Look for ways to reduce your monthly expenditures to save toward a down-payment. You could enroll for an automatic savings plan at your bank to have a portion of your payroll automatically transferred into savings. Most people save a couple of years for their down payment.
Borrow the down payment from your retirement plan Check the provisions of your retirement plan. You can borrow funds from a 401(k) plan for a down payment or make a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, repayment terms and/or possible early withdrawal penalties.
Move You may be able to save additional funds if you can move into less expensive housing.
Reduce other higher interest rate debt Paying off credit cards will initially reduce your savings, but the money you will save from higher interest rates will pay-off in the long run.
Make a deal with the seller In some circumstances, it is appropriate to ask the seller to carry a second-mortgage to cover your down payment. Typically, you will pay a slightly higher rate for this second mortgage.
Sell some investments
Get a second job and save your earnings
Skip a year's vacation
Gift from Family Parents and other family members are often anxious to help children buy their first home and may have the means to give you a gift of money for a portion or all of your down payment.
Alternative Sources
No-down and low-down Mortgages
FHA Loans The Federal Housing Authority (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in helping low- to moderate-income families qualify for mortgages. FHA assists first-time buyers and others who would not qualify for a conventional loan, by providing mortgage insurance to private lenders. Interest rates for an FHA loan are usually the going market rate, while the down payment requirements for an FHA loan are lower than conventional loans. The required down payment can be as low as 3 percent and the closing costs can be included in the mortgage amount.
VA Loans VA Loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can qualify for a VA Loan, which usually offers a competitive fixed interest rate, no down payment and limited closing costs. While the VA does not issue the loans, it does issue a certificate of eligibility required to apply for a VA loan.
Piggy-back Loans A second mortgage that closes with the first. Often the first mortgage is for 80% of the purchase price and the "piggyback" is for 10%. The home buyer covers the remaining 10% with their down payment. (Some lenders will write a second mortgage of 15% or even 20% of the purchase price.)
"Carry Back" Mortgage In the case of the seller "carrying back a second mortgage", the seller loans you part of his or her equity. In this scenario, you would finance the majority of the loan with a traditional mortgage lender and finance the remaining amount with the seller. Typically you will pay a slightly higher interest rate on the loan financed by the seller.
Housing Finance Agencies These agencies offer special loan programs to low- and moderate-income buyers, buyers interested in rehabilitating a home in a targeted area, and other groups as defined by the agency. Working through a housing finance agency, you can receive a below market interest rate, down payment assistance and other incentives.
The primary mission of Housing Finance Agencies is to boost home ownership in targeted areas, among first-time buyers and those with little money for down payments. Most of these non-profit agencies were funded with state government seed money and now operate independently.
Click here for a list of Housing Finance Agencies.
Documenting Your Down Payment
Documenting that the down payment comes from your savings and that you will have savings and/or assets over and above the down payment gives the lender confidence in your strength as a borrower and your ability to repay the loan.
Take extra care to document the sources for any monies to be used for the down payment or closing costs.
Acceptable Down Payment & Closing Costs Sources
Cash in a bank account
Mutual funds / stocks / IRA / 401K
Proceeds from the sale of another property
Gift from an immediate relative
Click here to learn more about verifying your down payment, closing costs, income and debt.
Take Advantage of Loan Pre-Qualification
The Advantages
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Know how much house you can afford.
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Know how much cash you will need for the down payment.
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Simplifies pre-approval.
A number of factors determine the price range of homes you'll want to preview - one of these factors is loan pre-qualification.
As your agent, I will help you pre-qualify. Items considered when pre-qualifying for a mortgage loan include:
Employment History
Credit History and Scores
Monthly Income and Expenses
With my knowledge of the mortgage market, I'll help you make an informed decision as to the type of loan you'll want. There are many different types of loans to consider - FHA, VA, Conventional and even Bad Credit Loans. We'll find the best loan for your situation.
Loan Application Checklist
In general, the documentation you will need includes:
Check for application fee
Property Information (if you already have a contract on a house)
Purchase Agreement.
Copy of legal description and MLS sheet.
If you are selling your current home, copy of listing contract.
If you have sold your current home, copy of settlement statement (HUD-1).
Income & Assets
Pay stubs for the last 30 days.
For the past two years:
Names and addresses of each employer.
W-2s
Statements for each bank, mutual fund, and/or investment account for the last three months.
Estimated value of personal property and furniture.
If you have made any large deposits to your accounts:
Explanation and source for deposit.
If large deposit was a gift:
Signed gift letter (lender can supply).
Copy of gift check.
Copy of deposit receipt.
If you own more than 25% of a business:
Corporate or partnership tax returns.
If self-employed:
Tax returns for the last three years (with schedules).
Year-to-Date Profit and Loss Statement prepared by an accountant.
If you own rental property:
Tax returns for the last two years and current rental agreements.
If you are retired:
Pension Award Letter.
If you receive Social Security:
Social Security Award Letter.
If you are counting child support as income:
Copy of divorce settlement.
Copy of twelve months of cancelled child support checks.
Debts
Names, addresses, account numbers, balances and monthly payments on all current loans.
Explanation of credit report anomalies, including:
Late payments, credit inquiries in the last 90 days, charge-offs, collections, judgments and/or liens.
Bankruptcy filed within last seven years (bring a copy of your bankruptcy papers).
VA Loans
Copy of DD Form 214, Report of Separation.
Miscellaneous
Photo ID and proof of Social Security number.
Residence addresses for the past two years.
If applicable, a copy of your divorce decree.
If you are not a citizen, a copy of the front and back of your green card.
Karyn Smith Realtor GRI ABR Broker Associate 321 939 7671
Kissimmee Information, Short Term Rental Information, Vacation Homes, Holiday Homes, Kissimmee, Davenport, Uk Buyers, Canadian Buyers, European Buyers, Windsor Hils, Windsor Palms, Bella Vida, Emrald Island, Terra Verde, Rolling Hills, Indian Creek.
