Everyone Says Homes Are Unaffordable. What If You Shopped the Entire Homeownership Equation Instead?

1. Compare a Single Family Detached Home With a Condominium

A condominium can be a wonderful home.

But do not assume a lower purchase price automatically means a lower overall cost or an easier mortgage transaction.

A condominium can introduce another financial layer:

The condominium project itself.

For certain Conventional financing, Fannie Mae requires lenders to evaluate applicable condominium project eligibility in addition to underwriting the borrower and individual property. Project characteristics, insurance, financial condition, assessments and other requirements can matter. 

There may also be monthly condominium association dues.

So imagine comparing:

A $350,000 condominium with a $600 monthly association payment

against

A $385,000 detached home with no HOA.

The less expensive property does not automatically create the lower total monthly housing expense.

This is why I want buyers working with their real estate agent and mortgage professional together.

Do not shop only by purchase price. Shop by total housing expense.

2. If the Property Is Truly a Second Home, Compare Second Home Financing With Investment Property Financing

This one requires an important warning.

You cannot simply decide to call an investment property a second home because the financing may be more favorable.

The occupancy must be legitimate.

Under Fannie Mae’s current second home requirements, the property must satisfy specific conditions, including being a one unit dwelling, being suitable for year round occupancy, being occupied by the borrower for some portion of the year and remaining under the borrower’s exclusive control. Fannie Mae also distinguishes a second home from a rental property. 

But if you are genuinely purchasing a second home and meet the applicable requirements, tell your mortgage broker exactly how you intend to use the property.

Do not automatically assume every property you are not using as your primary residence must be financed the same way.

Accurate occupancy matters.

The goal is never to manipulate an occupancy classification.

The goal is to make sure you are using the correct financing for the property you are actually purchasing.

3. Ask Your Mortgage Broker to Compare Mortgage Insurance Across Wholesale Lenders

This is one of the areas buyers often overlook.

They shop interest rates.

They shop lender fees.

But they may never ask:

“What about my mortgage insurance?”

For certain Conventional loans with less than 20 percent down, private mortgage insurance may be required.

The cost can vary based on the transaction and borrower profile.

And this is one of the advantages a mortgage broker may be able to explore through different wholesale lending relationships and mortgage insurance options.

In some qualifying scenarios, I may find remarkably low monthly mortgage insurance pricing, potentially even around 0.16 percent annually in a particular quote.

But that is not a universal mortgage insurance rate or a promise.

Credit profile, down payment, loan characteristics, insurer, lender and other factors can affect the actual premium.

This is why a slightly stronger credit profile can sometimes matter in ways the buyer never considered.

Do not ask only:

“What rate did I get?”

Also ask:

“What does my complete monthly mortgage payment look like?”

4. Consider Whether an Escrow Waiver Makes Sense When It Is Permitted

Many mortgages include an escrow account.

The lender or servicer collects money each month toward property taxes and homeowners insurance and pays those bills when they become due.

In some eligible Conventional transactions, an escrow waiver may be available subject to applicable requirements. Fannie Mae’s guidance allows certain escrow waivers while requiring escrows in other circumstances. 

But this needs to be understood correctly.

Waiving escrows does not eliminate your property taxes.

It does not eliminate homeowners insurance.

You still owe those expenses.

Instead, you may be taking responsibility for paying them directly when due.

For a disciplined homeowner who qualifies and prefers controlling those funds personally, that may be worth discussing.

For someone who prefers spreading those expenses into a monthly mortgage payment, escrowing may be better.

This is not about which option sounds cheaper.

It is about which structure appropriately fits the homeowner.

5. Compare a 5/1 ARM With a 30 Year Fixed Mortgage

Most buyers immediately ask for a 30 year fixed mortgage.

That may absolutely be the right choice.

But it should not always be the only option examined.

A 5/1 Adjustable Rate Mortgage, commonly called a 5/1 ARM, has an interest rate that remains fixed for the first five years. After that initial period, the rate can adjust according to the terms of the mortgage. 

ARMs can sometimes begin with a lower interest rate than comparable fixed rate mortgages, although that is not guaranteed. The tradeoff is future uncertainty because the rate and payment can potentially increase after the initial fixed period. 

So do not automatically choose an ARM.

And do not automatically reject one.

Ask your mortgage broker to show you:

30 year fixed versus 5/1 ARM.

Then compare the initial payment, rate, adjustment caps, index, margin, long term plans and potential future payment.

If you expect to own the home for decades, the predictability of a fixed rate mortgage may be extremely valuable.

If your circumstances make an ARM worth considering, understand exactly what happens after year five.

Compare before deciding.

6. Look at Flood Insurance Before You Fall in Love With the House

This is especially important in Florida.

Two homes with similar prices can produce very different ownership expenses because of insurance.

A property in a Special Flood Hazard Area can trigger a flood insurance requirement depending on the mortgage and circumstances. The National Flood Insurance Program explains that flood insurance is required for properties in Special Flood Hazard Areas with certain federally backed mortgages, while lenders may also impose requirements in other circumstances. 

So when your real estate agent finds a property, do not wait until the final days before closing to ask about flood insurance.

Investigate it early.

And remember:

A property where the lender does not require flood insurance is not the same thing as a property with no flood risk.

A buyer can still choose flood insurance even when the mortgage does not require it.

The better question is:

What is the flood exposure, what insurance is required and what could protecting this home realistically cost me?

7. Look for Low HOA Dues or No HOA When That Fits Your Lifestyle

A $400 HOA payment is $4,800 per year.

A $600 HOA payment is $7,200 per year.

That does not automatically make an HOA bad.

An association may provide services, amenities, maintenance or insurance that would otherwise cost the homeowner money separately.

But HOA expenses belong in the affordability conversation.

If two homes both sell for $400,000 and one has substantial monthly association dues while the other does not, the monthly housing expenses may be significantly different.

So tell your real estate agent:

“Do not just find me homes within my purchase price. Help me find homes within my total housing budget.”

That is a better search.

8. Ask Your Agent to Help Identify Homes That Do Not Immediately Require Major Repairs

The mortgage payment is not the only cost of buying a house.

Imagine closing with almost every dollar you have and discovering that the home immediately needs:

A roof.

Air conditioning.

Electrical work.

Plumbing.

Appliances.

Major structural repairs.

Or significant insurance related improvements.

Your inspection and professional evaluations matter.

So instead of using every dollar of your buying power simply to purchase the most expensive home possible, consider the condition of the property and the likely expenses after closing.

A slightly less expensive home in better condition may leave you in a substantially stronger financial position.

Affordability continues after closing.

9. Consider Closing Near the End of the Month

This one is small but fascinating.

Mortgage borrowers generally pay prepaid interest at closing for the period between the closing date and the period covered by their first mortgage payment. The CFPB specifically identifies prepaid interest as daily interest accruing between closing and the applicable payment period. 

That means closing later in the month can often reduce the amount of prepaid interest collected at closing compared with closing earlier in the month.

For example, all else being equal, closing on the 29th generally means fewer days of prepaid interest than closing on the 5th.

But understand the distinction:

This generally reduces cash collected for prepaid interest at closing. It does not make the house cheaper or reduce the mortgage principal.

And you should never jeopardize a transaction merely to save a few days of prepaid interest.

Still, if the contract, seller, title company, lender and buyer can accommodate the date, it is worth understanding.

The CFPB confirms that prepaid interest and initial escrow deposits are part of the amounts that can affect upfront closing costs. 

10. What About Buying a Duplex, Triplex or Four Unit Property Instead?

Now the affordability conversation gets really interesting.

Suppose instead of purchasing a single family home, you purchase a duplex.

You live in one unit.

Another unit already has a tenant.

Or perhaps you purchase an eligible triplex or four unit property, occupy one unit as your primary residence and rent the others.

Under applicable mortgage guidelines, qualifying rental income from a two to four unit principal residence may potentially be considered, subject to program and documentation requirements.

Fannie Mae’s current guidance specifically permits rental income from a two to four unit principal residence, subject to its qualifying and documentation rules. When existing leases transfer to the buyer, the lender may need the executed leases along with the applicable appraisal documentation. 

That can create an entirely different path toward homeownership.

Instead of asking:

“How do I afford this house by myself?”

The conversation may become:

“Could an owner occupied multifamily property allow me to live in one unit while eligible rental income from the others helps support the property?”

That does not mean everyone should buy a duplex.

Being a landlord comes with responsibilities, expenses and risk.

But for the right buyer, it deserves consideration.

11. Your Real Estate Agent and Mortgage Broker Should Be Shopping Together

This is the larger lesson.

Your real estate agent should not simply search for:

$450,000 homes.

And your mortgage broker should not simply search for:

The lowest advertised rate.

The two professionals should help you evaluate the complete transaction.

Imagine your agent finds three properties.

Property A: Lower purchase price, but high HOA dues and a flood insurance requirement.

Property B: Slightly higher purchase price, no HOA, lower expected insurance expense and no lender required flood insurance based on the applicable flood determination.

Property C: A duplex where you could occupy one unit and potentially use qualifying rental income from the other.

Which home is most affordable?

You cannot answer that from the listing price.

And you cannot answer it from the mortgage rate alone.

You have to run the complete numbers.

Maybe We Have Been Shopping for Homes Backwards

Everyone tells buyers:

Shop the lender.

Shop the rate.

Shop the price.

Those things matter.

But I want buyers to go further.

Shop the property type.

Shop the monthly mortgage insurance.

Shop the insurance exposure.

Shop the HOA expense.

Compare fixed and adjustable mortgage structures when appropriate.

Evaluate whether escrows should be waived when permitted and appropriate.

Look at the condition of the property.

Consider the closing date.

Explore owner occupied multifamily properties.

Ask whether seller concessions or lender credits make sense for the transaction.

Compare down payment assistance when appropriate.

And have your mortgage broker evaluate multiple wholesale lenders when available.

Because affordability is not one number.

The Bottom Line

Maybe the question is not simply:

“Can I afford to buy a home in today’s market?”

Maybe the better question is:

“Have I explored all of the legitimate ways to structure the property, mortgage and transaction more intelligently?”

Sometimes the answer will still be:

Not yet.

And that is okay.

But sometimes a buyer who thought homeownership was impossible was simply looking at the wrong property, wrong financing structure or wrong combination of expenses.

There are potentially many ways to affect:

Your monthly mortgage payment.

Your cash needed at closing.

Your insurance expenses.

Your association expenses.

Your financing costs.

And your long term cost of homeownership.

You do not manipulate occupancy.

You do not ignore insurance risk.

You do not choose an ARM without understanding the future adjustment risk.

You do not waive escrows and pretend the bills disappeared.

You simply look at the entire equation.

And that is where a knowledgeable real estate agent working alongside a mortgage broker can become incredibly valuable.

Your Next Step

If you are considering buying in Port St. Lucie, Stuart, Fort Pierce, Royal Palm Beach, Wellington, Jupiter, Tequesta, Palm Beach Gardens, West Palm Beach, Boynton Beach, Tampa or anywhere in Florida, do not send me only the purchase price.

Send me the property.

Let me look at the taxes.

Insurance.

Flood requirements.

HOA.

Property type.

Occupancy.

Mortgage insurance.

Available loan structures.

Potential wholesale lender options.

And the estimated cash needed to close.

Then let us compare the entire homeownership equation.

Because the goal is not simply to get you approved for a mortgage.

The goal is to help you understand what you are buying, what it may cost you and which available financing structure appropriately fits your life.

Sources and Further Reading

Consumer Financial Protection Bureau

The CFPB provides consumer guidance explaining mortgage costs, prepaid interest, escrow accounts, fixed rate mortgages and Adjustable Rate Mortgages. 

CFPB Mortgage Resources⁠

Fannie Mae Selling Guide

Fannie Mae’s current Selling Guide provides requirements concerning condominium projects, occupancy classifications and rental income from two to four unit principal residences. 

Fannie Mae Selling Guide⁠

National Flood Insurance Program

FloodSmart provides information about flood insurance availability and circumstances in which a mortgage lender may require flood coverage. 

National Flood Insurance Program⁠

Contact Information

Edgar DeJesus

NMLS #230414

Call or Text: 561 223 9347

Email: Edgar@TreasureCoastHomeLoans.com

Helping home buyers, homeowners and real estate professionals throughout Port St. Lucie, Stuart, Fort Pierce, Royal Palm Beach, Wellington, Jupiter, Tequesta, Palm Beach Gardens, West Palm Beach, Boynton Beach, Tampa and communities throughout Florida understand mortgages and homeownership with greater clarity and confidence.

Important Disclosure

This article is provided for educational and informational purposes only and does not constitute legal, tax, financial, investment, real estate or lending advice. Property tax laws, constitutional proposals, exemptions, assessed values, millage rates, eligibility requirements and implementation rules may change. Information regarding proposed legislation or constitutional amendments reflects information available at the time this article was prepared and should not be interpreted as a guarantee that a proposal will be approved, implemented or produce a particular tax result.

Property tax obligations vary by property, jurisdiction, assessed value, exemptions, residency, ownership circumstances and other applicable factors. Buyers and homeowners should consult the appropriate Florida county property appraiser, tax collector, attorney or qualified tax professional regarding their individual circumstances.

Mortgage payment estimates involving property taxes may be based on estimated amounts and may differ from actual future tax bills. Future property tax reductions or exemptions should not be assumed when determining whether a borrower can afford a mortgage unless permitted under applicable lending and underwriting requirements.

Loan approval is not guaranteed and remains subject to lender review and verification of all required borrower, credit, income, employment, assets, liabilities, property, appraisal, title, insurance and other applicable information. Interest rates, Annual Percentage Rates, mortgage programs, lender credits, discount points, closing costs, underwriting guidelines and program availability are subject to change without notice.

Innovative Mortgage Services, Inc. is a Florida licensed lender.

Company NMLS #250769

Originator NMLS #230414

Florida Mortgage Lender License #MLD178

Florida Mortgage Lender Servicer License #MLD2167

Equal Housing Lender

Editorial Note: This article was prepared with AI assisted research, organization, and grammatical review, with final content reviewed and approved by Edgar DeJesus NMLS #230414.