Florida FHA Guidelines Made Simple

Florida FHA Guidelines Made Simple

posted in: Mortgages

COVID exposed every flaw of your rental—the noise, the slow repair processes, and most of all, the money you were paying for your rental never built any equity at all. While renting is an excellent option for some people, homeownership is generally a good investment.

The great thing about buying a home right now is the low interest rates available on an FHA loan. Current interest rates can be as low as 2.75%.

Obtaining a home loan can be tricky. There are many different home loans out there. However, if you are looking to buy a home, getting an FHA loan is a good option.

Let’s look at the loan guidelines and requirements for an FHA loan in Florida.

What is an FHA Loan?

FHA stands for the Federal Housing Authority. The Federal Housing Authority does not directly make loans to home buyers. Instead, it acts as insurance for the loans made by mortgage companies and banks.

The FHA loans have minimum requirements, and mortgage companies that want to offer FHA loans in Florida must follow the appropriate loan guidelines. Those include a minimum credit score rating, a minimum down payment, and FHA interest rates.

However, a mortgage company may ask for a higher credit score than the FHA requires to ensure you are a good credit risk for a home loan.

This situation happened to be the case during the COVID lockdown for many mortgage companies. They wanted to make sure that loans were being given to people who would continue to make their payments, even though economic times were tough. Therefore, it is a good idea to ask what credit score a mortgage company needs as part of your pre-approval process.

What Are the Requirements for an FHA Loan in Florida?

Minimum Credit Scores

A borrower under an FHA loan in Florida must have a minimum of a 500 credit score. If your credit score is between 500 and 579 must have a 10% down payment. For instance, if the house you want is $300,000, you must have $30,000.

If you have a credit score above 580, you will need only 3.5% of the total house cost. That same $300,000 house now only requires $10,500 for the down payment.

Mortgage Insurance Premium (MIP)

A mortgage insurance premium is a payment that helps offset the risk that a lender may be taking by offering a loan to a person with low credit. Your loan amount will determine the premium, and you will need to have a small percentage of that upfront on the day you close on your house.

Employment History

To qualify for an FHA loan, you must have two years at your most recent employer or show a steady income stream. Examples of steady income would be disability pay or self-employment.

Proof of Identity and Residency Requirements

You must be able to prove you are legally old enough to sign the paperwork, that you are who you say you are, and have proof of your social security number.

You must use the home you are purchasing with an FHA loan as your primary residence. You cannot use an FHA loan for a rental (income) property or a second home.

Front-End Ratio and Back-End Ratio

Your front-end ratio is your mortgage payment, plus homeowners’ association fees, mortgage insurance, and homeowner’s insurance. This ratio cannot exceed 31% of your income. You can see how much house you can afford on the FHA website’s mortgage calculator.

Your back-end ratio is all your debt (including the new mortgage) versus your income. This ratio is also called the Debt-to-Income Ratio. This ratio cannot exceed 43%.

Another limit to remember is the purchase price limit. For a Florida loan, most counties are drawing the limit at $356,362. However, some countries may have a higher purchase limit due to the median prices of homes and incomes.

Previous Bankruptcy or Foreclosure

You must be at least two years out of bankruptcy and show that you have managed your money well in those two years. There are exceptions to this, but you should talk with your lender to find out what those are and if you qualify.

If you had a home foreclosed, you must wait three years to qualify for an FHA loan. Again, there are exceptions, and you will need to speak to your lender to see if you are eligible.

Is an FHA Loan Right for Me?

If you are looking to buy a home with a Florida loan and have less than perfect credit and a small down payment, the FHA loan is a good bet. The loan requirements are made to make homeownership easier for low-to moderate-income families.

A great lender can help you navigate the proper steps to take even if your credit is not where it needs to be or save for a down payment. A wide variety of loan products are available, and your search for a home should start with a lender who understands your situation. Loan guidelines are sometimes hard to understand, so you need a reliable mortgage broker!

Where Do I Start on a Home Loan Application?

It would be best if you started with a trusted, reliable mortgage broker. We have the experience you are looking for when applying for an FHA loan in Florida, and we can help you start the process. We even have a checklist for preparing for a home loan.

To get to the home buying stage, you’ll need to obtain a pre-approval letter. We are experts in the field and are eager to help you attain that dream of the perfect home for your family.

FHA requirements do change every year, so it is essential to have the latest information and know your choices. This path helps you build your credit and put money away for a down payment and closing costs.

Take the first steps toward moving out of that rental, and contact us for more information on FHA loan requirements today!

7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with each mortgage transaction phase. If you are searching for a home loan in New Jersey, Pennsylvania, Delaware, Maryland, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.