The world of mortgage lending provides a variety options for those looking to purchase a new home or to refinance a current mortgage, including an FHA loan in Florida. One of the main financing options available to those with a smaller down payment or less than perfect credit is the FHA loan program. In essence, the program works by providing lenders with a government guarantee that helps to mitigate the financial risk to the lender. On the other hand, borrowers benefit from being able to access credit that might otherwise not be available through traditional conventional mortgage lending.
While there are various requirements that must be met in order to qualify for an FHA loan in Florida, it is important to note that there will be an additional cost for the mortgage insurance that the FHA provides. Your monthly mortgage amount will reflect this as PMI. Once you have paid down your loan to the point that it is less than 80% of the value of your home, then you can request that the PMI be removed and that mortgage insurance be dropped.
For those in Florida, recent changes in the basic FHA loan requirements reflect the increasing of maximum loan amounts. Keep in mind, however, that these loan amounts may vary by county, so it is important to know what your county’s limits are before beginning the loan application process. While in a majority of cases, these limits will not impact your purchase, it is important to know before deciding on a home purchase and putting in an offer.
Additionally, to use the FHA loan program, you must have a down payment of at least 3.5% of the purchase price or adjusted value of the home. These funds must be your own or can be a gift from a donor. However, if you are receiving a gift, be sure to follow all the requirements to make sure that the gift can be used for your down payment.
Your lender will need to follow specific FHA guidelines regarding your employment and income history. For instance, Florida lenders will require two years of employment and income history. Income for those who are employed or self-employed can be proven through pay stubs, tax returns, W-2s, or 1099s. If you are including child support as part of your income, then it is important to document the court orders for either alimony or child support, which show it will continue for at least three years, as well as documenting the receipt of the income for at least three months.
Can the Seller Contribute?
When a seller accepts a borrower’s offer, part of that offer may include different concessions or contributions by the seller as part of the closing. Therefore, it is important to note that the FHA loan program does place specific limits on how much a seller can contribute as part of the FHA loan. Currently, in Florida, that limit is 6% of the sales price.
Minimum Credit Score and Other Income Guidelines
For those looking at conventional financing options, a high credit score is a must. However, with the FHA loan program, Florida residents may qualify for a loan with a tri-merged credit report score as low as 640. The preferred tri-merged credit score is 680 for approval but there is some flexibility depending on the lender. If the co-borrower does not have a credit score, then the mortgage may still be approved as long as the primary borrower can meet the credit score requirements on their own, while also providing more than 50% of the qualifying income and a minimum of 3 tradelines that have been active for the last two years.
If you have had a bankruptcy in the past, either a Chapter 7 or Chapter 13, then you might be wondering if that means you will not be able to qualify for an FHA mortgage loan. While bankruptcy does not mean you are disqualified from getting an FHA mortgage. However, once your bankruptcy has been discharged for over 2 years, but you must meet the extenuating circumstances defined by the FHA. Speaking with your lender about your credit history can help them determine whether you can qualify for a mortgage through this program.
Keep in mind, as a borrower, you are going to be required to explain or meet specific requirements if you have a previous foreclosure or deed-in-lieu. Borrowers with a foreclosure or deed-in-lieu can be eligible under the program if you have reestablished your good credit. However, you will be required to go through the manual underwriting process. If your foreclosure was part of your bankruptcy, then you will also have to wait for the foreclosure waiting period to elapse. Under the FHA loan program, HUD will treat a foreclosure and a bankruptcy as two separate events, meaning that you will have to satisfy both waiting periods before qualifying for an FHA mortgage.
Finally, it is important to note that HUD sets a maximum debt-to-income (DTI) ratio, although this may vary based on your credit score, as well as your credit history and assets. Working with your lender, you can determine what your DTI needs to be in order to qualify. Keep in mind, the lower your DTI, the better in terms of helping you to qualify for an FHA mortgage loan.
Florida Property Requirements
The FHA also sets out specific eligibility requirements for the properties that it will allow as part of its FHA loan program. FHA loans in Florida can be used for single-family residences, condominiums, modular, and mixed use, among others. Still, it is important to note that there are properties that will not qualify, particularly commercial ones and manufactured homes.
The rates for FHA loans are at a historic low. Therefore, if you are looking to purchase a home in Florida, consider the benefits of the FHA loan program. Even with a lower credit score or minimum down payment, you can still be a homeowner. Contact our team today to learn more about the FHA loan program and to see if you qualify.