So you’re looking at financing your new home in Florida? Perhaps you’ve been exploring several other states as a future home and are wondering “Can I get an FHA loan in Texas?” or maybe you’d like to know about the FHA loan qualifications in general.
Florida is a great state to live in. With fantastic weather, plenty of activities, and a relaxed culture, it’s easy to see why so many people choose The Sunshine State for their next home purchase. But what to do about financing your next home purchase? Let’s look at obtaining an FHA loan in this fantastic state.
What Is An FHA Loan?
An FHA (Federal Housing Administration) loan is a type of mortgage loan guaranteed by the United States Government. It is a great option for anyone who is looking to purchase a home for use as their primary residence, along with first-time home buyers, since first-time buyers often have less money saved for a down payment.
An FHA loan offers several advantages:
First, it offers income requirements that are easier to qualify for.
Next, it offers a smaller down payment that is fantastic for young families or borrowers who may not have a lot of cash in the bank.
Finally, there is more flexibility in where your down payment funds come from.
What Are The Requirements For An FHA Loan?
Overall, qualifying for an FHA loan is simpler than a conventional loan that you would obtain directly through a bank. So let’s take a look at a few, but not all, of the primary requirements of an FHA loan:
Minimum Credit Score Of 580 Or Higher
- This can be a little bit flexible depending on your down payment amount and income.
The Home Must Be Your Primary Residence
- An FHA loan may not be used for a rental property or a second home. It must be for your primary residence where you intend to live the majority of the time.
Have A Down Payment Of At Least 3.5% Of The Home’s Value.
- For example, if the home is valued at $200,000, a down payment of $7,000 would be required.
The Loan Amount Must Be Under The FHA Loan Limits
- The FHA limit for many states and areas is $420,680. However, if you live in an area that the FHA has designated as a high cost of living area, the loan limit may be nearly $1,000,000! Depending on the county or area you choose to live in, your Loan Officer can advise you of the local loan limits as stated by the FHA.
Acceptable Debt To Income Ratio
- Your total housing cost including mortgage payment, homeowners insurance, and property taxes when added together should be no more than 31% of your gross income before taxes.
- Your housing costs plus any other payments, such as monthly student loan, car, credit card, or child support payments when combined should not exceed 43%.
Who Is An FHA Loan Not Appropriate For?
An FHA loan may not be appropriate if one of the following circumstances applies to you:
You Have Enough Money To Make A Large Down Payment
- One downside of obtaining an FHA loan is that you are required to pay for MIP (Mortgage Insurance Premium), this amount is equivalent to 1.75% of the loan amount upfront as a closing cost, and 0.80% annually.
- If your down payment will be large enough you may wish to consider a conventional loan that may offer a lower MIP rate or there may be no mortgage insurance requirement whatsoever.
The Home Will Not Be Your Primary Residence.
- If you intend to purchase a vacation home, investment and or rental property, then a conventional loan is better suited to your needs.
Refinancing And Taking Out Cash From The Equity
- If your home value has increased significantly since you bought it and you wish to unlock some of your equity by refinancing and taking cash out, this can potentially be done with an FHA loan.
- However, the total loan amount can not exceed 80% of the home’s value when taking cash out during a refinance.
The Loan Amount Is Larger Than The FHA Loan Limit Amount
- If you intend to purchase a large, luxurious, or expansive property and the loan amount is too high, once again, a conventional loan will most likely be better for your situation.
We’re so glad to hear you’re interested in coming to Florida. Here at OVM, we are experienced in all types of mortgages, and an FHA loan can be a great option when trying to find the right loan for your situation. Speak with one of our Loan Officers here at Team OVM today, and begin your journey to finding your next home!