It’s time to get acquainted with FHA loans in Florida!
An FHA loan is a mortgage backed by the Federal Housing Administration. Borrowers can get a loan with a down payment of 3.5% with a credit score of 580 or higher. Therefore, it is a good solution for first-time home buyers or people with little savings.
The Federal Government insures this type of loan, so lenders are willing to provide favorable terms to borrowers who may not qualify for other mortgages.
You can use an FHA loan in Florida to purchase or refinance various types of real estate:
- Single-family houses
- Two- to four-apartment apartment buildings
- Certain homes manufactured (attached to a permanent foundation)
Also, certain FHA loans are used to finance new construction or home renovations.
FHA vs. Conventional loans — what to choose?
Getting an FHA loan is more accessible than getting a conventional loan, but there are a few other key differences between these loans:
- An FHA loan allows for a lower credit score. This option will be more attractive if you have experienced financial difficulties or bankruptcy.
- All FHA loans require mortgage insurance. With a conventional loan, you don’t have to pay insurance if you pay a down payment of 20%.
- Unlike a conventional loan, the property must be appraised and meet government standards to qualify for an FHA loan.
- FHA loans may include closing costs.
Requirements for FHA loans in Florida
There are minimum requirements for borrowers applying for an FHA loan. But be prepared that each lender also has its own standards.
- The minimum credit score is 500. If your score is below 579, you may qualify for FHA if you pay at least a 10% down payment.
- If your score is above 580, you can qualify for a down payment of only 3.5%.
- Your debt-to-income ratio may vary depending on your credit score or other factors — such as how much you have saved in the bank. If your credit score is between 500 and 579, the FHA typically requires a DTI of less than 43%.
- The property you plan to purchase must be appraised by an FHA-approved professional and meet FHA real estate guidelines. The main goal is to make sure the house is worth the price you will pay and will be a good investment.
How to apply for an FHA loan in Florida?
- A valid Social Security number.
- Proof of citizenship, legal permanent residency, or certain eligible work statuses.
- Bank statements for, at a minimum, the past 30 days. You’ll also need to provide documentation for deposits made during that time.
In certain cases, additional documentation may be required if you don’t have a credit score.
Pros and Cons of FHA Loans
An FHA loan may seem like a great solution to purchasing a home. But let’s take a closer look at the advantages and disadvantages.
Benefits of FHA Loans
- Lower minimum credit score requirements
- Opportunity to get a down payment of only 3.5%
- Debt to income ratio can reach 50%
Disadvantages of FHA Loans
- With a down payment of less than 10%, mortgage insurance is valid for the entire term of the loan
- The property is separately appraised and must meet strict FHA standards — for many sellers, this is just an additional hurdle
- You will not qualify for a big loan — the amount cannot exceed $472,000 (Florida limit)
- Despite the FHA requirements, you will also need to consider the lender’s requirements — by the way, rates also vary depending on the lender
How to Get the Best Rate on an FHA Loan?
First, get your finances in order. For example, check your credit reports for any errors. You can also pay off more significant balances to improve your debt-to-income ratio. Despite the FHA’s lenient requirements, a better DTI will get you a lower loan rate.
Paying a larger down payment will make you look like a safer candidate to potential lenders.
Take your time with decisions, but consistently compare rates from at least three FHA lenders. Even slight differences can save you thousands of dollars over the life of your loan.
If you have concerns about choosing a lender, lowering your rate, or any other questions about mortgage lending, ask LBC Mortgage. We work with over 60 lenders nationwide and will help you find the best financial option.
Our FHA loan experts understand the Florida market and can help you determine if this program is right for you. Start your journey towards your dream home with a free consultation at LBC Mortgage!