Finding a Down Payment on a Florida Mortgage: Increasingly Difficult
It’s 118 degrees in Baghdad, but Peter Hudson is willing to sweat it out there, literally, for 18 more months. Why? So he can save up money to buy his first home back in the States.
“I’m really hoping for a pool,” says Hudson, 32, who works for a contractor providing both private and corporate security outside Baghdad’s Green Zone.
By working in Iraq, he can temporarily pull in a six-figure salary that’s about double what he’d earn doing similar, if much less dangerous, work in the U.S.A.
For most of us, it’s hard to imagine risking our lives in a war zone to afford the American dream. Yet many first-time buyers are resorting to unusual extremes to scrape together money for a down payment and qualify for a Florida mortgage.
A number are making life-changing sacrifices, such as raiding retirement accounts, taking second jobs and even moving back in with Mom and Dad, according to government and industry figures.
Headlines about declining home sales and home prices portray a buyer’s market for real estate. For first-time buyers, though, the view is quite different.
For them, the Florida housing market is many times more challenging now than at any time since the early 1990s.
Rising Florida mortgage rates have eroded almost all the financial relief that buyers might have derived from the slight decline in prices in most areas.
On top of that, most of the time, Florida mortgage lenders will demand that customers produce larger down payments, more cash reserves in the bank, higher credit scores and less debt.
All of which many first-time applicants for Florida mortgages lack, especially in high-cost states like here in Florida, the Northeast and California.
Nearly half of first-time home buyers nationally put down no money a year ago, the National Association of Realtors reports, compared with fewer than one in five repeat buyers. The remaining first-time buyers put down a median of just 2 percent of the home price.
“I could put anybody in a loan last year,” says Stephanie Gagnon, a senior loan officer at First Capital Mortgage in San Diego. But, “In the last six months, all of the big lenders are shutting down all special programs they were working with because they’ve realized it’s bitten them.”
Now, she says, “I’m turning away 50 percent of my first-time home buyers. They just can’t qualify.”
It’s easy to say that the mortgage industry has finally returned to its senses, and to responsible lending policies, because 16 percent of borrowers with subprime, or bad credit Florida mortgage loans were in default at the beginning of the year.
Dozens of lenders have gone out of business since then.
But the tighter Florida mortgage market is not only shutting out borrowers with weak, or subprime, credit ratings.
It’s also putting pressure on first-time borrowers, who sometimes share financial characteristics with subprime borrowers: meager savings, a new job and a brief credit history (which, in effect, is equal to a poor credit history).
They also may have relatively large debts, such as student loans, which reduce the amount that a mortgage lender will give them. Just one late payment from their college days can haunt them for years.
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