FHA Loans
Florida
If you hope to buy a home in Florida soon, you might face obstacles such as a short credit history, difficulty saving for a large down payment, or concerns about higher interest rates in the current market. Many buyers in Florida encounter these challenges when pursuing traditional mortgage products. If you are having some financial concerns, there are alternative loan programs that can make your home purchase more affordable.
The United States government wants to encourage more people to become homeowners, as this helps to boost local economies. As a result, some home loan products are insured by the government so that more borrowers qualify. One of these home loan initiatives is the FHA loan.
What Are FHA Loans?
The Federal Housing Administration (FHA), under the umbrella of the Department of Housing and Urban Development, is the government branch that insures FHA loans. Most conventional mortgage products are insured by real estate entities, but some are deemed too risky for the secondary market. In these cases, the government steps in to back home loan programs like FHA loans.
An FHA loan is similar to a conventional loan but has looser requirements for borrower criteria. Since lenders receive partial backing from the federal government for an FHA loan, they can lower the bar for eligibility so that borrowers in Florida with more limited means can afford homes.
FHA products have been a crucial way for marginalized individuals to achieve homeownership. Over 30% of these loans went to borrowers of color last year, far higher than the amount of conventional mortgages underwritten for applicants of color. Denial rates for these products are significantly lower for borrowers of color than for other products, such as personal loans and conventional loans, helping to reduce racial disparities in homeownership.
With 48% of Florida’s population identifying as something other than non-Hispanic White, FHA loans represent an excellent way to build wealth through homeownership. LGBTQ+ individuals can also benefit from these products, especially as they are more likely to have high debt and lower credit scores.
A Florida FHA loan is ideal if you have poor or no credit, limited funds for a down payment, or a lower income. As long as the house will be your primary residence, then it is worth considering an FHA loan for your homeownership goals.
Benefits of Federal Housing Administration Loans in Floria
Conventional loans are not always accessible to first-time homebuyers in Florida. With the median sale price of Florida homes rising 3.3% in the past year, more affordable home loans may be your only choice. An FHA loan offers significant advantages that make it easier to buy a home.
Small Down Payment Options
For most FHA lenders, the minimum down payment is 3.5%. This is lower than the minimum 5% down payment required for repeat borrowers using a conventional loan, and even a few percentage points can make a major difference with such a large purchase.
If this still seems daunting, don’t worry: Pride Lending has access to local, state, and nationwide down payment assistance programs that will help make up the difference. In Florida, for example, we can help you apply to programs from the Florida Housing Finance Corporation, which provides a forgivable second mortgage for up to 5% of the home’s total cost. The Florida Homeownership Loan Program can provide up to $10,000 as a low-interest loan paid off over 15 years.
There are also countywide options, like those in Monroe County for Key West buyers, or Orange County’s first-time homebuyer program.
Competitive Interest Rates
If you are interested in an FHA loan in Texas, then you should understand the benefits of this option. Here are a few advantages Texas homebuyers will experience with FHA loans.
Flexible Underwriting Guidelines
Underwriting is the process of evaluating a borrower’s risk. Since these borrowers are in more precarious financial situations, most applications are underwritten manually. What loan officers look for during the underwriting process is usually more flexible with FHA loans, whereas a conventional product would have more strict requirements.
Assumable Mortgages (Buyer Can Take over Existing FHA Loan)
An FHA mortgage on a house in Texas may be eligible as an assumable mortgage for a new buyer. Essentially, instead of taking out a new loan to buy a house, you take over the debt and payments for an existing FHA mortgage and become the new owner of the house. This is an excellent option for people with spotty credit reports.
FHA Loan Requirements
Every lender will have their own requirements for the FHA program. However, the typical Texas FHA loan requirements are as follows.
Minimum Credit Score
To qualify for an FHA home loan, you should aim for a credit score of 580 or better, as they will allow you to access the best rates and lowest upfront expenses. Lenders approving FHA mortgages may allow for scores as low as 500 if they offer at least 10% upfront.
Down Payment Amount
As mentioned previously, the minimum down payment for an FHA mortgage is 3.5% for those with a score of 580 or greater; those with scores between 500 and 579 must make a minimum payment of 10%. Although this is a low down payment and makes homes more affordable, it also means you would pay a private mortgage insurance premium (MIP).
We understand that even 3.5% can feel like a challenge depending on your personal finances, but Pride Lending is here to assist. We’ll connect you with local, state, and nationwide down payment assistance programs that can provide you with grants or second liens.
Numerous organizations in Texas offer assistance for those who can’t afford their upfront costs. For example, you may choose DPA programs from the Texas State Affordable Housing Corporation (TSAHC) or the Texas Homebuyer Program from the Texas Department of Housing and Community Affairs.
Debt-To-Income Ratio (DTI)
DTI compares your monthly debt payments to your gross monthly income. You divide your debt total by the gross income each month and then multiply by 100 to get a percentage. The typical lender will require a maximum DTI of 43%. Lenders can make an exception to a maximum DTI of 57% if the borrower has a good credit profile and provides a larger down payment.
Property Standards
Since the government is backing this mortgage, approval for the property type is needed before the loan is given. An appraisal will ensure the property is safe to occupy and up to standards for liveable conditions.
Additionally, this home must become your primary residence to qualify. However, it is possible to purchase a property with up to 4 units and rent up to 3 units, as long as one is used as your permanent residence.
Mortgage Insurance Premiums (MIP)
Everyone, no matter how much they put down, needs to pay the upfront mortgage insurance premium, which is 1.75% of the loan amount. You’ll also have to pay ongoing annual mortgage insurance premiums, though this may not be for the entire length of the loan.
If you make a 10% down payment or more, the MIP will be removed after 11 years, but if you make less than this, you’ll have MIP for the entirety of the loan. It’s also possible to refinance into a conventional loan once you have 20% equity, which would remove mortgage insurance.
FHA Loan Limits in Florida
There are Florida FHA loan limits that set a maximum amount for what kind of home you can buy. These loan limits are dependent upon the county in which you live. For example, more expensive housing markets like Miami-Dade County will have higher limits than less populated areas. Additionally, the loan limits are different for single-family homes and multi-family homes. Here are some of the Florida FHA loan limits for a single-family home in various counties.
Miami-Dade County – $621,000
Broward County – $621,000
Hillsborough County – $498,257
Palm Beach County – $621,000
Orange County – $498,257
The FHA Loan Process
Applying for Florida FHA loans is straightforward. Whether you're just starting to explore FHA loans or are ready to apply, the process is designed to help you finance your purchase quickly. Here are the steps to acquiring an FHA loan:
See if you meet the requirements
Evaluate if you have a credit score of 580 or greater, a DTI of 43% or lower, and that you meet the down payment requirement of 3.5%. You may still qualify if you have a score as low as 500 or a DTI of 57%, but this may limit your choices.
Contact Pride Lending
When you reach out to us, we’ll begin your loan consultation by reviewing your options with you. FHA-approved lenders are qualified to give out these mortgages, and finding the right loan partner is the key to a positive homebuying experience.
Apply and get pre-approved
Pre-approval will prepare you for a smoother buying experience and help you understand what you can afford. You will need many documents for your application, including tax returns, paychecks, and bank statements.
Shop for the perfect home
Once you’ve been preapproved, we’ll discuss your budget with you and send your preapproval letter to your realtor. You can then begin shopping for the right property in your area.
Submit an offer
You and your realtor will decide on a competitive bid and submit the letter to the seller.
Complete the application
The application is called the Uniform Residential Loan Application and will include many of the same details you needed for preapproval; however, it will also include property details, which the lender will use to determine whether the property meets their standards.
Offer acceptance
The seller will decide if they find your offer acceptable. If they do, then you’ll sign a purchase contract that tentatively agrees to buying the home.
Inspection
While not strictly necessary for the program, the lender will likely require you to have the property inspected, ensuring that there are no significant issues.
Conditions
If you’re happy with the inspection results, then our team at Pride Lending will walk you through the sales contract and make sure everything is correct.
Underwriting
We will submit all the details that you have provided to the lender, whose underwriting team will now take over. They will carefully investigate each facet of the loan and ensure that there are no issues with you or the home.
Appraisal
An approved appraiser will evaluate the property to determine if it is a fair value, is safe to live in, and meets the property requirements for FHA home loans.
Loan approval
Once the appraisal is complete and the details of the loan have been reviewed, the lender will proceed with the final approval of your loan so that you can close on the transaction. We will schedule the closing date with you and the title company will send the information regarding how to pay the upfront expenses.
Close on the home
All the documents will be signed, the title will be transferred to you, the closing costs will be paid, and you will become the new owner of that house with the help of an FHA home loan.
Why Choose Pride Lending for Your Texas FHA Loan?
When you need the right team on your side to navigate the Texas FHA program, a loan officer from Pride Lending is ready to help. We serve all our clients with the same care, offering excellent customer service and a streamlined application process to make homeownership affordable and accessible.
Our team is composed of allies and members of minority communities, including LGBTQ+ and BIPOC individuals. We’re here to help everyone, no matter their identity, and serve as an advocate for those who may feel underserved by the mortgage industry.
First-time homebuyers and repeat buyers alike can work with Pride Lending whether they want to buy a single-family home or learn about an FHA reverse mortgage. Call us today at 725-231-0192 to learn more about Texas FHA loans.