In South Florida, it’s been all-cash all of the time.
But homebuyers paying all cash for their purchases may give way to more deals done with traditional financing, panelists said last night at a roundtable put on by The Real Deal.
The event, which drew more than 125 people to the Treetop Ballroom at Jungle Island, focused on how brokers can tap into the growing availability of mortgages to help their buyers.
More than two-thirds of all sales in the Miami market are all-cash, and Florida is the number one state for all-cash buys in the nation.
But with rising interest rates, it’s become more attractive for lenders to make loans, because they stand to make greater profits, panelists said.
“We are seeing a little bit less all-cash now,” said George Fraguio, director of end-loan financing for Fortune International, who leads the finance program for Fortune’s Midtown Miami development.
“The time to borrow is now. Rates are going to get much higher,” added Jay Parker, CEO of Douglas Elliman’s operations in Florida.
Lenders are also easing up on credit scores, after clamping down in the wake of the real estate bust.
Parker said last month, 30 percent of borrowers had a credit score of 700 or lower, according to one report, a change from the past.
Cyndi Barros, a senior loan officer at Prospect Mortgage, gave the example of a South Florida family with a 680 credit score who put less than 10 percent down in a recent deal — domestic buyers, and not in a new construction condo.
Many South Florida homeowners experienced short sales and foreclosures during the bust, and their credit suffered. But banks are starting to look past that – in some cases – when those homeowners look to buy again, if they have very strong salaries and savings, Parker said.
That appraisal values have caught up with actual values of homes has also helped.
“It’s not as scary as it was before [to meet lending requirements],” Parker said.
Changes in mortgage guidelines coming from the federal government in January could add additional red tape, though. But those guidelines don’t pertain for foreign nationals, so that South Florida could see a silver lining compared to the rest of the country, said James Campanella, residential mortgage manager at City National Bank.
Even for all cash buyers, there are options for financing – known as a technical refinancing – that are becoming more prevalent. After a buyer pays all cash, they get a mortgage after the deal closes.
“We understand that buyers want to go all-cash because that gives them leverage [in getting a deal],” said Isabella Lacambra, a senior vice president and mortgage production manager at Gibraltar Private Bank & Trust. “We’ll give them the financing the next day after they close.”
For foreigners, there are also loan programs that can cover 30 percent of a purchase that brokers might not be aware of.
“It’s a great program and we are very aggressive,” Campanella said.
An upshot of the fact that there have been more all-cash deals is that brokers are not taking the time to make sure their buyers are prequalified to buy a home, or are not being cognizant of their relationship with those in the lending community, should they need to arrange financing.
“You’ve been so accustomed to doing all-cash deals, you may have gotten a little rusty,” Fraguio told the brokers in the audience.
Regardless of slightly loosening lending, those on the panel said risky products like no-income no-asset loans that were seen during the last boom are unlikely to return.
“It will never get to back where it was before during the boom,” Campanella said
Ken Johnson, a professor at the Tibor & Sheila Hollo School of Real Estate at Florida International University, moderated the event.
The roundtable was sponsored by Midtown Miami Residences and Citi National Bank.