For some, the housing prices in Florida may look cheap compared to New York or California. For others coming from places like Ohio or Tennessee, they may look expensive.
No matter which group you fall into, here’s what you need to consider to determine how much house you can afford in Florida:
How Much House Can You Afford in Florida?
There are many different factors involved in calculating how much house you can afford in Florida. So before you get started on your home search, let’s figure out what your budget should be based on these factors and calculations:
Factor 1: Your Income
The first factor that is used to determine how much house you can afford in Florida is your income. Generally, you should be able to afford no more than three times your annual salary on a house. So if you make $100,000 a year, you should look for houses that cost around $300,000.
Factor 2: Your Debts
The second factor that is used to determine how much house you can afford in Florida is your debt. In an ideal world, you would be able to spend your entire paycheck after taxes.
In reality, however, some of that money goes toward monthly debt payments for student loans, auto loans, and credit card debt.
Calculate Your Debt-To-Income Ratio
To get a better idea of how your monthly debts compare to your monthly income, you need to calculate your debt-to-income ratio.
Lenders use the DTI ratio to estimate how much you can borrow based on the 28%/36% rule. According to this guideline, no more than 36% of your gross monthly income should go toward debt payments, and no more than 28% should go toward housing payments.
So let’s say that you make $100,000 a year, which leaves you with about $8,333 a month gross. Let’s also say that you have minimum debts that just consist of a $200 monthly car payment and $100 monthly student loan payments.
Calculating your debts first at $300 a month, they make up a mere 3.6% of your gross monthly income. From there, you should be able to afford to spend up to 28% of your gross monthly income on your mortgage payments, or about $2,333.
It’s essential to keep in mind that just because you can afford to pay a certain amount doesn’t mean that you necessarily should. Lower monthly mortgage payments and saving more money on a monthly basis are always good things.
Factor 3: Your Down Payment
The third factor that is used to determine how much house you can afford in Florida is your down payment. If possible, it’s always recommended to put down 20% of the home’s purchase price. However, if that’s not possible, you may be able to put down as little as 3%, depending on your loan type.
Just remember that if you do put down less than 20%, your monthly mortgage costs are going to be higher, thanks to PMI. PMI is private mortgage insurance and is used by mortgage lenders to mitigate some of the risk they take on by lending to a low down payment borrower.
On average, PMI will cost you about 1% of your home loan amount per year. Once you reach 20% equity in your home, you can get rid of PMI.
Let’s suppose that you purchased a house for $300,000 but put the minimum of 3% down for a total of $9,000. This leaves you with a mortgage loan of $291,000, an annual PMI cost of just under $3,000, and a monthly PMI cost of about $250.
Factor 4: Your Interest Rate
The fourth factor that is used to determine how much house you can afford in Florida is your interest rate. After all, borrowing money isn’t free, and you will likely pay thousands of dollars over your loan term in interest.
Note that interest rates vary based on the type of loan you’re applying for and your financial profile. For example, 15-year loans come with lower interest rates than 30-year loans, and adjustable-rate loans often come with lower initial interest rates than fixed-rate loans.
Additionally, credit scores over 740 qualify for the lowest interest rates and the lower your credit score is, the higher your interest rate will be since lenders use this to help offset the risk they take by lending to someone with poor credit.
So for a 15-year fixed-rate loan in Florida with a credit score over 740, you can expect to pay 2.589% in interest. For a 30-year fixed-rate loan with the same credit profile, you can expect to pay just under 3.4% in interest.
If you have a lower credit score between 680 and 699 (the average credit score is 698), then you can expect to pay 3.834% in interest for a 30-year fixed-rate loan and 2.598% in interest for a 15-year fixed-rate loan.
Housing Expenses: Calculate Property Taxes and Homeowner’s Insurance Premium
Once you have taken into account your principal and interest, you also need to take into account the other components of your monthly mortgage payment, namely property taxes and homeowner’s insurance.
Property taxes are levied by the county you live in to cover things like schools, roads, parks, and emergency services. The exact property tax rate varies by county and even home value, but you can expect to pay just under 1% per year on property taxes in Florida. So if your home is worth $300,000, you will have to pay $3,000 a year or $250 a month.
Homeowner’s insurance is required by lenders as it protects your home in the event of damage from natural disasters, vandalism, or burglary. Homeowner’s insurance can be more expensive in Florida due to the higher likelihood of natural disasters like hurricanes and floods.
As a result, you can expect to pay around $1,500 a year or $125 a month for coverage. Keep in mind that your policy premium will vary based on your location and the features of your home.
What Can You Buy in Different Parts of Florida?
Florida is a large state with many distinct areas and real estate markets — some more expensive and competitive than others.
Now that you have a better idea of what you can afford to spend on a house in Florida, let’s take a look at some of the different real estate markets throughout the state to see what you can afford in different cities:
In Miami, the median listing home price is $465,200, and the median sold home price is $440,000. Generally speaking, you can expect to pay about $345 per square foot in Miami. The market in Miami remains competitive and is considered to be a seller's market as inventory remains low and demand is fueled by both domestic and international homebuyers.
2. Fort Lauderdale
In Fort Lauderdale, the median listing home price is $499,000, and the median sold home price is $440,000. Overall, you can expect to pay about $361 per square foot in Fort Lauderdale. The market in Fort Lauderdale is considered a seller’s market since there are more people looking to buy than there are homes available.
3. West Palm Beach
In West Palm Beach, the median listing home price is $325,000, and the median sold home price is $351,500.
Most likely, you can expect to pay about $225 per square foot in West Palm Beach. The market in West Palm Beach is considered a balanced market with supply equaling demand and with homes selling for 1.22% below asking price on average.
In Tampa, the median listing home price is $355,000, and the median sold home price is $350,000. Generally speaking, you can expect to pay about $229 per square foot in Tampa. The market in Tampa is considered a strong seller’s market, with homes usually being sold at or above the asking price.
In Clearwater, the median listing home price is $330,000, and the median sold home price is $320,000. Generally, you can expect to pay about $232 per square foot in Clearwater. Like Tampa, the market in Clearwater is considered a strong seller’s market, with homes usually being sold at or above the asking price.
In Sarasota, the median listing home price is $450,000; the median sold home price is $420,000. Generally speaking, you can expect to pay about $271 per square foot in Sarasota. The market in Sarasota is also considered a strong seller’s market.
7. Fort Myers
In Fort Myers, the median listing home price is $325,000, and the median sold home price is $300,000. Generally speaking, you can expect to pay about $205 per square foot in Fort Myers.
Due to these relatively low home prices, the market in Fort Myers is extremely competitive for buyers. You should expect to pay the full asking price.
In Naples, the median listing home price is $566,000, and the median sold home price is $521,500. Overall, you can expect to pay about $310 per square foot in Naples.
Despite these higher prices, the market in Naples is still a strong seller’s market with no shortage of competition from buyers willing to meet or go above the asking price.
In Orlando, the median listing home price is $335,000, and the median sold home price is $327,000. Generally speaking, you can expect to pay about $201 per square foot in Orlando. Due to these lower prices and the growth in the area, the Orlando market is considered quite competitive.
In Jacksonville, the median listing home price is $272,000; the median sold home price is $280,000. Generally speaking, you can expect to pay about $168 per square foot in Jacksonville.
Even though the market in Jacksonville isn’t growing quite as much as in other places, it’s still considered a competitive seller’s market. Buyers should come prepared to offer the full asking price.
Making a Florida House Your Home
Based on these numbers, buying a house in Florida is well within your reach with the right lender. Vaster is a private lender willing to work with borrowers from all different backgrounds.
We even work with foreign investors with no stateside income or credit histories. So reach out to our lending experts today to see how we can make your dream of Florida homeownership come true.
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