First Time Home Buyer Florida Program Update
There is no magical way for a First time home buyer in Florida to get a mortgage loan to buy his/her first home. You still have to meet the many criteria for a mortgage that will be securitized in the market and conform to the guidelines set forth by HUD and various regulatory agencies. Typically, people associate first time home buyer loans with FHA loans. Thus, for the purpose of this first time home buyer update we will focus on providing potential Florida homeowners with qualification requirements pertaining to FHA loans.
Before we go into more detail, here is a simple way to look at how you qualify for a first time home buyer FHA loan: You either make enough money to qualify for an FHA loan or you don’t. You either have demonstrated credit worthiness or you haven’t. It’s as simple as that!
First Time Home Buyer Florida Program FAQs
Here are some basic cost and qualification requirements for a first time home buyer in Florida:
- What is the minimum credit score for FHA loans? Although some Florida mortgage companies will go down to a 580 credit score, most lenders require a minimum of 620 credit score to approve an FHA loan. Minimum FHA credit scores do not automatically qualify you for an FHA loan. Most mortgage lenders also like to see 1-3 positive tradelines such as credit cards reported on your credit for a at least 12 months. FHA does allow for nontraditional trade lines such as electric and cable but varies from lender to lender.
- How about bankruptcy or foreclosure? No bankruptcy in the last 2 years, no foreclosure, Deed in Lieu or Short Sale in the last 3 years from the date of your Florida mortgage loan application. Simply put, if you have had a bankruptcy, it had to have been discharged over 2 years ago. A foreclosure had to be completed over 3 years ago from the time the deed transferred from your name to another. Although there are talks about loosening up the foreclosure guidelines, for now you may want to use this timeline to be safe when evaluating your current circumstances.
- How much can you afford? Currently FHA in some cases allows all the way up to 55% debt-to-income ratio for loan income qualification purposes. What this means is, your total monthly obligation cannot exceed 55% of your gross monthly income. Preferably no one should want their monthly debt to be more than 41% but unfortunately certain homeowners try to push the envelope because they get emotionally attached to a home.
- What’s the minimum down payment for FHA loans? You need to put a minimum of 3.5% Down payment in excess of any closing costs or pre-paids. This means, don’t assume that putting $7,000 down on a $200,000 home is all you need to become a first time home buyer. You do have the option of asking the mortgage lender to give you credit from the rate towards closing costs in exchange for taking a higher rate if you have limited funds over the 3.5% down payment. Some borrowers do qualify for Down Payment Assistant from government agencies which may also be an option.
- Can you get help with closing costs on an FHA loan? The seller can contribute up to 6% towards your closing costs but that cannot go toward the 3.5% down payment based on the purchase price of your desired home. You may also search for a broker or a lender that will give you credit to cover all closing costs. Here at Florida Home Funding, we always provide our first time home buyers with a no closing cost option.
- What’s the Maximum FHA loan amount you can get? The maximum loan limits are set by your mortgage lender based on your income. In addition, the mortgage lender also has to take into account the Florida Maximum County loan limits set by HUD. For current FHA loan limits in Florida, visit https://entp.hud.gov/idapp/html/hicostlook.cfm
- Do you have to pay anything extra on an FHA loan? All FHA loans have mortgage insurance added to your monthly mortgage payment. FHA mortgage insurance currently is set to stay on your FHA loan for the life of the loan. As an alternative, you may want to look at putting 3-5% down on a conventional mortgage, which does not result in lifetime mortgage insurance payments. Lastly, FHA loans also come with a hefty upfront one-time mortgage insurance premium that is stacked on top of your principal loan amount. The upfront mortgage insurance is 1.75% of your principal loan amount.
Contact a licensed Florida mortgage broker if you are looking for not only the best FHA loan rates in Florida but also if you would like a professional to sit with you, explain and lay out a successful long or short term strategy (based on HUD guidelines) to help you become a qualified first time home buyer in Florida.
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