is it true that Florida Residents Can’t Afford Their Homes Based On Income And Home Prices? With homes at record prices and interest rates creeping up, how have home buyers done this year when it comes to staying within the 28/36 rule? 

First, what is the 28/36 rule? The 28/36 rule is essentially your debt to income ratio (DTI). Using this means that your mortgage payment shouldn’t be more than 28% of your monthly pre-tax income and 36% of your total monthly debt.

To calculate your DTI, divide your income by the sum of your mortgage, interest, HOA payment, insurance, and property taxes. If the figure is above 28%, you run the risk of being house poor. And with Florida home prices, that can happen quickly. Data provided by Wealthcare Financial.

The study finds:

• Florida’s average two-person household income ($121,522) does not allow prospective buyers to afford the average home price, $597,718

• The average Floridian looking to buy a new home will likely be 13% over the debt to income ratio (DTI) and therefore be unable to qualify for a home loan

• Homeowners’ insurance is $1,338 more than the national average in Florida, which is increasing the unaffordability of Florida homeownership

• Monthly Mortgage + Interest	$2,100.00
  Monthly HOA Payment	$150.00
  Monthly Homeowners Insurance	$250
  Monthly Property Taxes	$333
  Total Debt	= $2,833
  Gross Monthly Household Income	$10,833
  $2,833/ $10,833	= 26%

   

  For the debt side, divide your income by the sum of your monthly expenses like student loans, car payments, credit card payments, etc. If the figure is above 36%, you’re at risk again and likely unable to truly afford the home and your lifestyle. 

   

  Monthly Student Loans	$700
  Monthly Car Payment	$500
  Monthly Credit Card Bill	$2,000
  Total Debt	= $3,200
  Gross Monthly Household Income	$10,833
  $3,200/ $10,833	= 30%

   

• On Average, How Is Florida Doing?

  According to our research, the average two person household income in Florida in 2021 was $121,522, while the average home price was $597,718 (median $410,000). Considering an average property tax rate of .98% in Florida and homeowners insurance averaging out at $3,643, which is $1,338 more than the national average of $2,305, it’s safe to say that Floridians are not meeting the 28/36 rule. 

   

  Mortgage (20% down) + Interest (6%)	$3,372
  Property Taxes .98%	$488
  Insurance	$303
  Income	$121,522
  Total	= 41%

  Shaun Tarzy, Managing Partner at Wealthcare Financial says, “With so many people moving to Florida recently, the housing market has gotten very competitive and put a lot of buyers in a tough spot financially. For anyone not within the 28/36% rule, we recommend making lifestyle adjustments to offset the ‘over budget’ cost of homeownership.”

• What Can Florida Homeowners Do To Get Closer To The 28/36 Rule?

  There are certainly a few things Florida homeowners can do to get closer to that 28%. For starters, homeowners should be obtaining multiple quotes for their homeowner’s insurance to make sure they are getting the lowest rate possible. Secondly, when rates come back down, homeowners should highly consider refinancing their mortgage. Refinancing can save thousands of dollars over time and hundreds on a monthly basis. 

   

  “While homeownership might seem daunting, it’s much more financially savvy than renting. At 41% DTI, Floridians are overspending on their homes but if they hold their property for a few years, they’ll likely be able to sell and turn a profit, which you can’t do with a rental,” says Michael Boggiano, Managing Partner at Wealthcare Financial.

   

  In addition to getting multiple insurance quotes and refinancing, homeowners can save themselves almost an entire month’s payment by asking their lender to split their payments into 2 times a month instead of one. Interest accrues every day and reducing that principal balance every 14 days (26 half payments per year) saves more in interest charges than one full additional payment every 12 months. 

   

  “Simple hacks like a bi-weekly mortgage payment strategy can save homeowners thousands of dollars and cut down their loan by years,” say’s Shaun Tarzy, Managing Partner at Wealthcare Financial.

   

  While Florida homeowners might overspend on their homes, owning is almost always better than renting.

• Methodology

  To determine how well buyers have done at managing their money with a new home purchase, we used the 28/36 DTI ratio as our basis for calculation. We then sourced the average home sale price, current interest rate, average property taxes, and average insurance cost to determine debt. We then sourced the average 2-person household income to calculate the total DTI ratio.

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