Buying Your First Home in Florida

Written by Justin Neil Gaynor

Savings

So, you are thinking of buying your first home in Florida. I can’t say I blame you. Spending money on rent is not only a complete waste of money beyond having a roof over your head temporarily, but rental rates are astronomical these days. Here in the Daytona Beach area the average monthly rent is about $1500. That means that on average to move into an apartment it would cost you about $4500 (first and last month’s rent, plus a security deposit).

Starter homes in Volusia county are priced between $170k and $299k. With an FHA loan, that means with a minimum 580 credit score you will need approximately $20,000 to $30,000 for your 3.5% down payment and closing costs based on today’s (03/28/2023) market. Since you will already have $4500 to move into an apartment, that means you just need an additional $15,500 to $25,500 in savings to close on your own home.

Down Payment / Closing Cost Assistance Programs

It can take a while for most people to save that amount of money and here in America, and particularly here in Florida, the citizens have really made homeownership for all citizens a priority. There are down payment and closing cost assistance programs that can add significant portions, if not all, of the funds needed for closing costs to the borrowers situation. Some of these programs are in the form of grants, forgivable and non-forgiveable deferred second mortgages, and more. Connecting with a local mortgage broker familiar with the national, state, and county programs available in the areas you are interested in buying is a great place to start.

Credit Score and Credit Report

Your patterns of repaying debt are the next thing you will want to make sure you have in order. The lower your credit score and the more late payments, derogatory marks and so forth, the more difficult it will be to get approved, the more expensive it can be, and the more cash you may have to come up with for a down payment. Not to mention that if you have no credit at all, it can be worse. That’s right, no credit history can many times be worse than having a few negative things going on with your credit report. With no credit, you are uncharted territory for the lender. They have no idea what they are getting into.

The best thing to do if you have what we call “challenged credit” is to begin taking steps as soon as possible to build or clean up your credit report and strengthen your score. Your local mortgage broker can offer some direction and if there are significant issues they can recommend a good credit counseling agency.

Your Income

The next thing to consider is your income. One of the most important determining factors in you getting approved for your first mortgage is your capacity to repay the loan.

Lenders want to see that you have enough consistent income in relation to what your overall debt payments will be with the mortgage loan in place. There are a couple ratios that they look at that you can monitor to determine your financial health and be best positioned when you go to buy that house.

ratios. The front-end ratio is essentially housing related expenses such as Principal, interest, taxes, insurance, and any HOA fees. The back-end ratio is all of that, plus your other regular monthly expenses like minimum payments on credit cards, installment loans on automobiles, personal loans, etc. The maximization of your income and reduction of monthly debt expense is what needs to happen to get this looking the best you can.

There is a DTI calculator at JustinNeilGaynor.com that can help you keep track of where you are.

We will continue this article next month, or if you would like to schedule an appointment | phone call | ZOOM schedule it via Calendly HERE.

Buying your first home can be an intimidating thing. Don’t be afraid. Simply work on the things we talk about diligently and we can get you there.

The ratios are called your front-end and back-end debt to income