Investors looking to add Florida homes to their portfolio should consider pulling the trigger sooner than later. I say this with all candor as Florida home values are continuing to drop, but the cost of acquiring them may very well increase. Great values are still out there to be found. For example, there are a good number of homes listed locally in the Orlando short sale market that fall more into the upper middle to luxury category as opposed to the lower tier from which these residences normally emanate. But you need to act now, and here’s why:
Florida Home Values are Down, but Florida Home Loan Costs are Climbing
It’s no secret that lenders are starting to tighten borrower requirements after being zapped by a record breaking number of home loan defaults – especially here in Florida. Though it means a little less money is flowing through to Florida mortgage brokers like me, the loans that are clearing today are being underwritten and funded the right way.
As a fiscal conservative, I am very happy that regulations are beginning to cinch up a bit, forcing some of the more adventurous investors and brokers out there to make wiser choices! This being the case, the costs and barriers to access for Florida home loans on properties other than primary residences are starting increase.
Number of Allowable Financed Florida Homes Drops from 10 to 4
Perhaps one of the biggest changes hitting the Florida home loan marketplace in the last quarter is the downshift in the maximum allowable number of homes financed through Freddie or Fannie for any one borrower from ten to four.
While investors from “back in the day” are grandfathered in under this policy, those looking to add say, a few pieces of Clearwater Real Estate into their investment portfolios will fall under the 4-Max Cap. But moving forward, finding and even buying a choice few selections of luxury Orlando, Florida real estate won’t be the problem… financing them with conforming Florida mortgage funds will be. This may not apply to you if you’re an all cash buyer. However, do you really want to limit your liquidity in today’s market with mortgage rates hovering near 4-year lows?
Factor in Larger Down Payments and Higher Fees
Investors looking to acquire a few west coast Clearwater homes, a couple pieces of beautiful east coast Coconut Grove real estate, or a nice quiet “snow bird” friendly home here in centrally located Winter Haven, Florida will first want to consider the impact increased down payment requirements and mandatory Fannie Mae “pay-for-risk” pricing fees may have on their anticipated profits.
As recently as early-2008, it was common to purchase Florida investment properties with 10 percent down. However, lenders today are requiring an average of 15 percent down – and the fun doesn’t stop here! As an added wrinkle, many private mortgage insurance firms have stopped writing policies for rental properties, forcing lenders to increase their 15 percent down payment figure to a mandatory 20 percent down.
Fees add another dimension to your Florida investment property purchase plans. Our good friends at Fannie Mae recently gained approval for and have implemented added fees per a “pay-for-risk” pricing model to all of their investment property loans.
Based on loan-to-value, the Fannie Mae Pay-for-Risk fees break out as follows:
- 75% Loan to Value (LTV) = the addition of 1.750 percent of the borrowed amount
- 75.01 – 80.00% LTV = the addition of 3.000 percent of the borrowed amount
- Greater than 80% LTV = the addition of 3.750 percent of the borrowed amount
Obviously, the degree to which these fees impact your purchasing plans will vary from significant to not at all depending on how much money you are prepared to put down. Obviously, if your LTV sits below 75 percent, it’s likely that such charges will not apply to your situation.
Bottom line
All things considered, now is a very good time to make those Florida investment property bids, as many Florida homes still represent extremely attractive and viable choices for serious investors looking for long term portfolio diversification.
If you’re serious about investing in Florida real estate, be sure to speak with a qualified Florida mortgage broker about your plans to tackle tighter conforming guidelines, larger down payments, and potentially higher fees. With the proper guidance, you could soon be the proud owners of your very own bit of Florida Sunshine!
Apply for a Florida Mortgage Today
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Kevin Sandridge
The Florida Mortgage Pro
Signature Home Funding
410 Laurel Cove Way
Winter Haven, FL, 33884 |
Mobile: 863-604-3019
Fax: 888-496-0265
kevin.s@sigfunding.com
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