Often times you can afford more than you would expect. But also, in some cases not as much as you were wishing for ... Regardless of whether it was something you have always wished for or a spur of the moment decision - when looking for a vacation home in Florida you should know in which price range you should be searching.
Because, after all, the house should be a useful investment which also brings fun and not a source of financial stress. It would be the best if you take care of this ahead of time with a so-called "Pre-Approval" form. This letter will confirm the maximum purchase price and loan amount you qualify for while financing in Florida. Crucial here are two factors: equity and income.
To the US banks, the amount of money available in your account is not the only thing considered. Other revenue sources also play a role, for example: from sales (house, vintage car etc.), bonus payments from the employer, foreign bank loans, redemption of saving contracts or brokerage accounts, mortgages or early termination of life insurance and much more. Important is the following: to get a loan in Florida you have to provide the source of equity. This has to be done over a 60-day period. So if you have the amount of money in one of your accounts, the bank will definitely request 60 days worth of bank statements. That can be sufficient. Only if the money has been deposited very recently, i.e. within the past 60 days, you would be asked to provide the following (analogous to the source of equity): i.e. sales contract, loan contract with your foreign bank, confirmation of bonus payments etc. - whatever could be considered as a source of your equity.
But which sums are we talking about here, how much equity is necessary? US banks generally give a mortgage of up to 70% for foreign nationals financing in Florida. So you have to calculate in at least 30% in equity, plus closing costs, reserves (insurance and property tax) as well as savings (6-12 monthly installments). This sum is the evidentiary equity. We will be glad to provide you with the calculations to show you approximately how high this sum will be. In order to be well prepared you should always ask for such calculations. This will not only show you the total amount of equity you need to provide, but also the costs for the mortgage in Florida as well as the anticipated monthly costs. This way you know ahead of time what to expect, making it possible for you to have better financial planning.
This includes income from self-employment and non self-employed work, from rent and leases etc. Here again, everything that is traceable. Any rental income from the US vacation home will not be acknowledged by the US bank, even when the rental contracts are already existing. What matters is only the actual value for employment, more specifically the average of the past two years and the current year for those who are self-employed. Therefore you will have to provide the most recent proof of income of the current year as well as the proof of income from December of the past two years as an employee. If you have switched employers during this time, this does not hinder you, as long as there are not any long breaks in employment and now a permanent employment situation exists. For those who are self-employed, the US banks want to see proof of self-employment for at least two years. This means, even if your company has good numbers to show for itself - the US banks want to see that your business is in existence for at least two years. If you are self-employed you would need to have your accountant create a brief statement indicating the income earned in the two previous years as well as the approximate yearly income for the current year in a three-line paragraph. If you would like, we will provide you with a sample letter which includes optional text.
How much do I have to earn in order to afford a house in Florida as a foreign national?
Here, your existing and new liabilities come into play. Generally speaking, your expenditures for a loan on a new house in the Sunshine State, combined with potential routine obligations in your home country should not exceed 35% of your gross income. There are some Florida banks which will allow up to 45%. But this has to be worked out individually. Included in this total would be, for example, a loan you took in your home country in order to provide equity.
In conclusion you could say the following:
- Equity = at least 30% + closing costs + reserves + savings
- Loan costs in the USA + rent-/loan costs in home country < 35% of gross income (profit, income, rental income etc.)
We gladly provide you with the "Pre-Approval" and the calculations during your preparation process - of course at no cost.