There are 3 Things You Will Need to Get a Mortgage in Florida
#1) You Will Need an Acceptable Credit Score or Enough Open Credit Lines for the Lender to Manufacture a Credit Profile
Believe it or not, not everyone has a credit score these days. This can be true even for people who have used credit in the past, and that past credit usage still shows up on their credit report. If you are not currently making regular payments on some kind of credit account, or at least have an open credit account such as a credit card that you rarely use, you may not have a credit score. Many people who swore off using credit after getting into a bind during the last recession may find that they may not qualify for a mortgage because they no longer have a credit rating.
How to Qualify for a Mortgage if You Haven’t Used “Credit” for Years But You Do Rent A Home in Your Name
If you have been renting and have utility bills from electric, gas and water and sewer companies in your name that have been paid on time, some lenders may be able to construct a credit profile as an alternative to an actual credit score. Unfortunately, some lenders today only use the quicker and cheaper “automatic” underwriting by a computer program, rather than a human loan processor and or mortgage underwriter. Whether you have been using credit regularly or not, a good credit reference from your landlord is extremely important because it shows a bank or mortgage company how you currently handle the housing payment you now have.
If You Want A Mortgage but Have been Living With Relatives for Years and Don’t Have Cancelled Rent Checks and Utility Payments to Prove Payment History
If you have been living with family and can’t show paid utility bills in your name or that you have paid rent by showing canceled checks and bank statements, you probably will not be able to get a mortgage to buy a home in Florida or anywhere else, until you reestablish credit. One way to do this is to get secured credit cards which are much easier to get approved for, than regular unsecured cards.
How to Establish or Reestablish Credit in Order to Qualify for a Mortgage
A Credit Union is owned by the people who have savings and checking accounts at the institution, not by corporate shareholders. Some credit unions, offer secured credit cards that can be used to build a credit score. Some banks also offer secured credit cards to enable borrowers to start building credit or to help them reestablish good credit after running into credit problems in the past. In order to get one, you will have to deposit money into a savings or other account that you pledge as security, in return for a secured credit card. After you obtain a secured credit card, charge a small purchase like gas for your car every month and pay it off in full each month to build good credit.
- Make sure the financial institution will report your secured credit card payments to all 3 major consumer credit reporting agencies
- Open 1-3 secured cards all within a short period of time while you don’t have a score, and then refrain from applying for any more credit accounts until you generate a credit score and it increases high enough to qualify for a mortgage to buy the home you want in Florida.
- Make on-time payments regularly to show responsible use of credit. Your credit score may increase slightly every month as you make payments as agreed. You probably will not build a high credit score overnight. It will take time.
- You may generate a credit score after as little as 6 months after you start making on-time payments. What your score will actually be may be affected by any good or poor older credit that is still on your credit reports. Negative credit will be removed after about 7 years. It takes about 10 years for a bankruptcy to automatically drop off of your credit report. Positive credit accounts will drop off of a credit report about 10 years after it’s closed.
- Every time you apply for new credit, that inquiry will appear on your credit report and will likely drop your credit score, but not drastically. Checking your own credit score usually does not affect your score if it’s a soft inquiry, so be careful who you do this through.
You Have More Than 1 Credit Score, Here’s the One That Most Mortgage Lenders Use
Some people pay to learn what their credit score is but find the lender they applied for a mortgage with, is using a different number which may be lower. When you apply for a mortgage, most banks and mortgage companies will pull a merge report which generates credit reports and scores from all 3 major consumer credit agencies. The credit scores from the 3 agencies are usually all different. You may have a 640 credit score from 1 agency, and a 625 and 660 from the others. Most mortgage lenders will use the middle score to determine if you qualify for a home loan. From the scores mentioned above, the middle score of 640 is what most lenders will use to qualify you for a mortgage, because of the other scores, one is higher and one is lower.
What Credit Score is required to Qualify for Mortgage Loan?
In the years leading up to the housing crisis and recession of 2008, many mortgage lenders lowered the minimum credit score a borrower needed to qualify for a home loan. Many loans were granted to people with low credit scores and poor credit histories. Unfortunately, many of those borrowers end up not making the payments on their homes. Mortgage lenders toughened their standards after the recession hit which made it more difficult for home buyers to get a mortgage. Now, roughly 8 years after the housing collapse, many lenders are again starting to lower the required credit score borrowers need for a mortgage. Minimum credit scores for many lenders have now dropped to a middle score of 660 for conventional mortgages and 620 for FHA backed mortgage loans.
If need a mortgage but your middle credit score is lower than 660, getting prequalified with a lender that does FHA mortgages may be your best bet. Personally, if I wanted a mortgage today but had lower credit scores, I would call many different lenders to ask them if the do FHA loans and what credit score they require. I would not let any mortgage company pull my credit scores until I was confident that my chances of being approved by them was better, than my chances with the other lenders.
- Remember, your credit score will take a small hit every time a lender pulls (hard inquiry) your credit report.
- Be aware that filling out applications with online lenders may result in your credit report being pulled which can lower your credit score. It’s probably not best to just start filling out lots of applications online with different mortgage lenders. This could result in a low but appoveable score, being knocked down into the loan rejection range.
- Not all bank and mortgage companies will see your qualifications exactly the same. Find a lender that will work with your financial situation.
- With the same middle credit score, you may be approved by one mortgage lender and with the same exact credit, turned down by another.
- Call around and truthfully describe your financial situation (without giving your SS# and birth date so they can’t pull credit reports yet) to get an idea of which home loan lender seems the most anxious to work with you and your credit situation to approve you for the mortgage you want.
#2 Mortgage Borrowers Need Verifiable Steady Ongoing Income
Qualifying for a Mortgage to Buy a Home to Relocate to Florida if You are Retiring
In order to qualify for a mortgage to buy a home in Florida when you’re retired, you will need to prove that you will have continuous income to pay the monthly payment, even though you no longer work. If you are retired and collect social security and or have other steady retirement income, you may qualify for a mortgage by properly documenting that income as required by your lender. You can qualify for 30 year mortgage even if you are 80 years old because rules prevent lenders from discriminating against borrowers based on their of age, for most mortgage loans,
How To Qualify for a Mortgage If You Are Disabled
If you’re disabled, you can use disability income you receive in order to qualify for a mortgage, as long as you can document certain information for the lender. The lender may require that you prove your disability, and therefore your disability income, is not temporary. Since you may be applying for a mortgage that could require monthly payments for 15 or 30 years, they will probably need documentation that you disability is permanent, in order to use your disability income to qualify you for the mortgage you want.
How to Qualify for a Mortgage If Your Income Comes From Employment or Self Employment
In order to qualify for a mortgage to buy a home in Florida if your income is from employment or from running your own business, you will likely need to document employment income in the same line of work in Florida, that you had in the past where you moved from. For instance, if you have been a nurse for the last 10 years and get transferred to Florida, or get a new nursing job in Florida, you may qualify for a mortgage to buy a home right away based on the income from your new job, because it’s the same line of work you have be doing.
If you move to Florida before you have a job, then find one pretty quickly in the same line of work, you may also be able to qualify for a mortgage as long as there wasn’t too long a period of time in time between leaving your last job, and starting your new one. You may have difficulty qualifying for a mortgage using your past experience as a nurse for example, if you move to Florida and are unemployed for a substantial period of time. If you are self employed, you will need 2 years of tax returns to prove income, rather than showing W-2’s and pay stubs.
Getting a Mortgage While Working in the Same Line of Work VS Starting a New Career
If you were a nurse for 10 years, move to Florida and get a job as a car salesman, it may be 2 years or longer before you qualify for a mortgage to by a home because your income now comes for a different line of employment. If you move to Florida and become employed in the same line of work as you have been in for at least 2 years where you previously lived, you have a good chance of qualifying for a mortgage without any “seasoning” in your new job.
Getting a Mortgage Right Out of College
If you have never worked because you left high school and went to college, you may be able to qualify for a mortgage right after you graduate. For instance, if you have attended college for 4 years and earned a degree in business administration and land a job in management shortly after graduating, the lender may treat the 4 years you were in college, just the same as if you working in that field for the past 4 years. If you spent 2 years at nursing school, but took a job as a manager trainee at a restaurant, it may be 2 years before you can qualify for a mortgage because you did not become employed in the field you trained for. Basically, most mortgage lenders want to see at least 2 years of steady employment (or study in that field at an institution of higher learning, and then employment in that field) before they will consider granting a mortgage for a home or condo purchase.
#3 You Will Need Money for a Down Payment and or Closing Costs to Get a Mortgage
In almost every case, a borrower will need some money for a down payment and or closing costs. Yes, there are 100% mortgages available. Also, a savvy buyer or real estate agent may be able to get a seller to pay a substantial amount of the closing costs for a buyer in order to lower the amount of cash out of pockety they will need to buy a home under some mortgages. However, the borrower will almost always need money for the credit reports and appraisal fee required by mortgage lenders up front, at a minimum.
If you are short on funds, there are instances where money from some non-profit organizations, funds from relatives (along with a gift letter stating the money is a gift and does not have to be repaid) and other sources that can be used to help a borrower who’s short on funds. There are specific types of mortgages such as VA, FHA and USDA that usually require far less out of pocket money from a borrower. Not all borrowers will qualify for these type of loans. Not all of these loans can be used in every location. For instance, no money down, 100% USDA mortgages can only be used to purchase homes in rural areas.
Not all homes qualify to be purchased using a low or no money down mortgage. As a general rule, the less money down required for a certain mortgage, the better the condition of home being purchased, must be in. You will probably not be able to buy that handy-man special or foreclosure using a low or no money down 100% mortgage loan.
The Bottom Line On Qualifying for a Mortgage to Buy a Home or Condo in Florida
- If you have a very high credit score, have solid a solid long term proven income stream that will continue into the future, are able to put at least 20% cash down and still have lots of money left in the bank, every mortgage lender will be falling all over themselves to get you to borrow money from them.
- The lower your credit score, the less money you have to put down and will have in the bank afterwords, and the shakier your income and work history is, the more work it will take to find the right lender who is willing to work with you in order to get you approved for a mortgage.
Find a Mortgage Lender that Specializes in Helping People in Your Specific Financial Situation (regardless of what it is)
Additional insight on getting a mortgage in Florida
- Mortgages were too easy to get in the years leading up to the housing crash that happened roughly 8 years ago. After the crash and the ensuing recession, mortgages became almost impossible to obtain, even for the average home buyer. Now, 8 years later (Dec. 2016), mortgage lending is loosening up again. No doc (no documentation) or low doc loans, also know as liar loans, where you just tell the lender what your income is and they don’t verify it, are starting to become more available, but at higher interest rates just like before the recession.
- Mortgage lenders spend about the same amount of time and money processing a loan for $50,000 as they do for a $500,000 one, but they will make about 10 times more money in interest and fees, from the larger mortgage.
- There aren’t enough people who qualify for $500,000 mortgages for every lender to earn a living just making this type of safer profitable loans, and the competition for high income, high credit score, high net worth borrowers is fierce.
- That’s why some lenders specialize in mortgages for people who qualify for lower loan amounts, have lower credit scores and less money for a down payment. You just have to find them. It will take time and effort, but it can make the difference between continuing to be a tenement or owning your own home.
Ron Stack “That Best Places Guy”
- Want to be certain if moving to Florida is right for you or your family? You’ll know after reading the Florida Move Guide.