What is an FHA loan, and how can it benefit you if you’re looking for a home?
It’s a mortgage loan insured by the Federal Housing Administration. FHA loans are supposed to assist low-to-medium-income families in becoming homeowners. So, they’re pretty popular among first-time homebuyers.
But what things should you know about FHA loans in Florida before applying for one?
Keep reading to discover seven things you must know about such loans and how to apply for one.
1. Work and Payment History
You’ll usually need a credit score of no less than 580 to get an FHA loan. But what if you don’t meet that threshold? Fortunately, there’s still hope.
If your credit score is south of 580, the lender could look at your work history over the last two years and your payment history for things like utility bills. So, there is a way around the credit score requirement with some lenders.
But it’s essential to remember that a lower credit score can translate into a higher interest rate for the FHA loan you qualify for.
2. Downpayment Terms
If you have a credit score of at least 580 and can afford a downpayment of 3.5% of the purchase price of a home, you can qualify for an FHA loan.
But if your credit score falls south of that threshold, you will have to make a downpayment of up to 10% of the home’s purchase price.
It’s possible to pay some or all of the downpayment via gifts from people you know as long as you can prove that the gifts are not actually loans. Contact Southern Home Loans for allowable gift sources.
3. Properties That Qualify for FHA Loans
It’s also vital that you understand what properties qualify for FHA loans. You can use an FHA-insured mortgage to purchase single-family houses, modular homes, multi unit up to 4 units, and manufactured homes.
4. Appraisal Process More Stringent
If you’re approved for an FHA-insured loan, you’ll find the appraisal process stricter than getting a mortgage loan from another lender.
An FHA loan appraiser has to perform the appraisal of the property. The seller must complete any substantial repairs before the closing date.
Examples of significant repairs include, but aren’t limited to, foundation damage or a worn-and-torn roofing system.
When the appraiser performs the appraisal, they will check to ensure that all minor and major repairs can be done for $10,000 or less. If the repairs cost more than that, the appraiser may deem the property uninsurable.
If this scenario becomes a reality, your FHA loan will not close.
5. FHA Loan Might Be the Only Option for Some
One of the benefits of an FHA loan is that it might be the only viable option for some homebuyers.
If you want to get into the housing market for the first time but haven’t saved a great deal, an FHA loan might be the godsend option you need. Sitting on the sidelines might not be an option for you. An FHA loan can help.
6. Different Kinds of FHA Loans
There are different types of FHA loans to consider. You can get an FHA loan for a primary residence if you want a home loan.
As the title suggests, an FHA 203(k) Improvement Loan is a loan for repair and renovation expenses.
You can also get a Home Equity Conversion Mortgage. It’s a reverse mortgage intended for seniors who wish to swap the equity they have in their homes for cash while still holding onto the properties’ titles.
Two other FHA loans are the FHA Energy Efficient Mortgage and the Section 245(a) Loan.
The FHA Energy Efficient Mortgage offers extra cash so you can make changes that will lessen your utility expenses. And Section 245(a) Loan offers lower monthly payments that slowly increase as your income goes up over time.
Bonus: Borrowing Limits Apply
According to the U.S. Department of Housing and Urban Development, FHA’s country-wide forward mortgage limit for a one-unity property in the calendar year 2023 is $472,030 to $1,089,300.
The actual numbers will differ based on what county you are purchasing in.
How to Apply for an FHA Loan in Florida
How do you apply for an FHA loan? You’ll need to start by finding a lender Once you find a lender, you must get pre-approved and complete an application form.
Don’t stress over the process. Your lender will explain the process, answer your questions, and ensure you know what to do. The process flows more smoothly than you might think if you find the right lender.
Do You Want to Learn More About FHA Loans?
Are you interested in learning more about FHA loan benefits? Do you want to see whether or not FHA loans are the right fit for you?
If you want to buy a home and wish to weigh all the mortgage loan options available, we can help. We offer a quick and easy tool that you can use to find out what you qualify for.
You can also shop for mortgage options and compare rates! It’ll take a lot of the stress out of finding the right home mortgage loan.
Get in touch to learn more about how we can get you the mortgage you need to buy a home.