Second Florida homes can be great investments, but buying and owning a second Florida home is different than owning a Florida home you live in all the time. Overall, it’s harder to qualify and more expensive to get a second Florida home loan for a second Florida home than for your primary home. Second home Florida mortgage lenders require that Florida second home loan buyers put down at least 5 – 10% percent and should expect to pay second home interest rates that range ½ - .75% percent higher for second Florida home than for a single-family home as a primary residence.
BUYING A SECOND FLORIDA HOME
If you are considering buying a second Florida home, Florida mortgage lenders will be looking closing at your will look closely at your Debt-to-income ratio. Your Debt-to-income ratio is the percentage of your gross monthly income that you pay toward debt (loans, credit cards, court-ordered payments), as well as your current home plus your estimated total monthly Florida second loan home payment. Your debt to income ratio will include the total housing expense plus HOA dues and private mortgage insurance, if you put down less than 20%. Understanding your debt-to-income ratio, can help make you an informed decision on a second Florida home loan.
ALL PROPERTY TYPES + ALL SECOND HOME LOAN SITUATIONS ARE WELCOMED!!
QUALIFYING FOR A SECOND FLORIDA HOME - DEBT TO INCOME RATIO
When you apply for your second Florida home loan, Florida mortgage lenders review how much debt you would pay every month if you added another second Florida mortgage to your monthly debt obligations. Florida mortgage lenders look at your existing debt payments, plus the new projected Florida second home loan mortgage payment for a second home, and calculate what percentage that represents of your total pre-tax income. This percentage is your debt-to-income ratio, which is one of the factors Florida mortgage Florida second home mortgage lenders use the new projected payment to decide whether or not to pre approve you for a a Florida second home loan.
Most Florida second home lenders often want your debt to be no more than 40% of your monthly pre-tax income; and you’ll have to accommodate both home mortgage payments within this percentage. If you can’t afford mortgage payments (plus taxes and insurance, etc.) and keep within that maximum 40% ratio, you may want to reduce your other monthly debt or consider a lower second Florida home loan amount.
HOW TO CALCULATE YOUR DEBT TO INCOME RATIO
When you apply for a second Florida home loan, Florida mortgage lenders calculate your debt-to-income ratio by using these steps:
1. Add up the amount you pay each month for debt and recurring financial obligations reflected on your credit report (such as credit cards, car loans and leases, or student loans but not monthly expenses not on your credit report like water, electric, food, or phone bills). Be sure to include your existing mortgage payment (including property taxes and insurance) in this number.
2. Add your projected additional monthly home loan payment to your debt total from step 1.
3. Divide that total number by your monthly pre-tax income. The resulting percentage is your debt-to-income ratio.
For example, if your monthly income is $5,000 and your monthly debts plus your monthly projected mortgage payment are $1,000, your debt-to-income ratio would be 20%.
LOWER YOU’RE (DTI) DEBT TO INCOME TO QUALIY FOR A SECOND FLORIDA.
If your Debt to income ratio is too high, you might be winding how you can lower it. You might be able to pay off your credit cards or reduce other monthly debt obligations. Or, you may also want to increase the amount of your down payment to lower the new projected monthly mortgage payment, or you may want to consider a less expensive Florida second home loan.
You might also consider whether refinancing your current Florida home to pay off other loans and debts. Refinancing a home loan is a big step, and it’s not something you should do if you’re planning to sell your Florida home within the next 6 to 12 months. But you may be able to pay down higher interest rate debts by rolling them into a lower-interest rate Florida home loan. This could affect your debt-to-income ratio by lowering your total monthly debt payments, or enabling you to pay off your debt more aggressively, or both. But this strategy requires careful consideration before you can really know if it’s the right choice for you—and the financial discipline to not run up the higher interest rate debts again once they’ve been consolidated your higher interest debts.
INVESTMENT OR VACATION FLORIDA HOME LOANS
If you are considering buying a second Florida home that you’ll rent to vacationers, do your homework before you apply for a second Florida home loan. Write down the estimated income you expect to earn while renting the Florida home and make a list of the estimated monthly expenses you’ll have.
BELOW WE HAVE LISTED SOME TYPICAL FLORIDA SECOND HOME LOAN EXPENSES:
Fixed expenses-Whether or not your Florida home rents, you’ll have to pay the monthly home loan, plus the bills for cable TV, heat and cooling, trash, water and phone. To estimate your rental income, take a look at advertisements for similar properties in the neighborhood, then check to see what the vacancy rate is in the area. A local Florida real estate firm specializing in local Florida rentals can give you a good estimate of how much you should charge. If the property has always been a A Florida rental home, ask the seller to disclose the rents and royalties schedule from his last few years’ tax returns. Florida mortgage lenders will typically count 75 percent of the estimated rental income to cover vacancies and unexpected expenses, not 100 percent.
Maintenance costs- Second Florida homes and vacation or rental properties have maintenance cost because you have many people coming in and out of your Florida investment or second home. The same ocean breezes that draw people to the Florida beachs will tear the screen door off its hinges and slam it into your outdoor light fixture. The Florida sandy beach salt will eat away the exterior of your Florida beach home.
Marketing costs- How do you expect a tent to know your second Florida home is for rent part of the year? If you use a real estate management company, they will want 20 to 50 percent of the rental income. Call around and ask what the fee includes and where the firm advertises. If they have a rental magazine, how many properties are listed, how often your property would be in it, and how many people are on their mailing list? You can also develop your own online web site, or one of the best ways to advertise your Florida vacation rental home is craigslist classifieds.
Flood insurance-Flood insurance costs vary depending on your Florida home’s location. The cost you will incur for Flood insurance depends on the height above sea level, its location and its age. Expect to spend thousands for flood insurance for your Florida beach or riverfront second home. Since recent Florida hurricanes Katrina and Rita, it has become more expensive to obtain flood insurance. Even so, the insurance covers just your home, not the sand under it. A big storm can wash away so much sand that the lot becomes "unbuildable," which may cause your second Florida home to lose value. Federal flood insurance caps out at $250,000. In some Florida coastal areas, you must buy private flood insurance. Also, Florida flood insurance policies don’t cover damage due to wind and rain.
Hurricane/wind insurance- Florida wind and Hurricane insurance is a separate policy that you may have to purchase from the Florida state insurance pool. In certain hurricane-prone areas, this type of insurance may be hard to get.
Florida homeowners Insurance will also be more expensive and could be more difficult to find if the second Florida home is vacant, as most Florida second homes are from time to time. The Internal Revenue Service will look at your second Florida home differently as well if you rent your second home for 15 days or more out of the year. You can click here to read the IRS tax rules for second Florida homes at the IRS Web site: