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FHA Loan in DeSoto County, Florida: Learn About the Low Down Payment Options

During the Great Depression, the housing industry experienced a lot of difficulties. Mortgages had strict terms, reducing the number of people who could own a home in the country. In response to these circumstances, the government set up the Federal Housing Administration (FHA) to make homeownership more affordable.

The introduction of FHA loans caused homeownership rates to grow exponentially. Buyers can make down payments as low as 3.5%. Also, borrowers can get approved for FHA loans with less-than-perfect credit. You also get an opportunity to purchase condos, single-family homes, manufactured homes, and multi-unit properties.

The Federal Housing Administration insures FHA loans, enabling lenders to offer these loans with less-restrictive credit requirements. Essentially, the FHA repays lenders whenever a borrower defaults on their loan.

FHA home loans are ideal for anyone looking to buy a home or refinance an existing mortgage. Besides, you could use this loan option to renovate this home or add energy-efficient improvements to the house.

Remember that you'll apply for these loans with credit unions and banks which administer them. Read on to learn more about this attractive loan option for first-time home buyers.

Debunking FHA Loans

FHA home loans are government-backed loans with low-interest rates and down payment requirements. Compared to conventional loans, FHA loans come with less stringent qualification requirements and guidelines. Most lenders require a 3.5% down payment to approve your loan.

Borrowers with less-than-perfect credit can leverage FHA home loans. Typically, first-time home buyers prefer this loan which is easier to qualify. However, you don't have to be a first-time home buyer to qualify for this loan option.

Opting for an FHA fixed-rate mortgage means that the interest rates remain constant regardless of the prevailing market conditions. With this option, you'll have an easier time budgeting your monthly expenses.

When considering FHA loans, research potential lenders and save up your down payment.

Down Payment Assistance Programs

If you can't raise enough down payment, get this amount from the Florida Housing down payment assistance programs. Typical down payment assistance programs include:

The FL Assist Program

Florida Housing provides a second mortgage program for eligible borrowers. You can get up to $10,000 and use it to pay for your down payment and closing costs. Anyone who qualifies for the FL First Mortgage Loan Program is eligible to receive the Florida Assist Second Mortgage Program.

However, remember that the FHA doesn't forgive the FL Assist. This amount becomes payable in different situations, including:

  • In the event of the sale
  • Transfer/ satisfaction of your first mortgage
  • When you refinance your property
  • When you cease occupying the property

Upon signing up for this program, you cannot combine it with alternative down payment programs.

The Florida Homeownership Loan Program (FL HLP)

Eligible borrowers could also opt for the second mortgage program that offers up to $10,000. While most borrowers use this amount for their down payment, they could still use money from this program to pay their closing costs and mortgage insurance premiums.

The second mortgage program is available for 15-year mortgage terms and comes with a monthly payment.

Once you have enough down payment, don't save this money under a mattress. Instead, find a suitable bank and open an account with them. Let your money sit there for a while as you scout for a good home.

FHA Loan Rates

Borrowers can choose between fixed and adjustable rate loans. Fixed-rate FHA home loans offer more stability and predictability throughout the loan's life. Fluctuating market rates and conditions might not impact your loan's rate.

On the other hand, adjustable-rate mortgage loans depend on a specific benchmark index interest rate. While these loans can have lower initial rates than fixed-rate loans, the rates can increase over time. Essentially, borrowers should be ready to pay a fluctuating amount.

In certain instances, the loan's length might affect the loan rates.

FHA Loan Requirements

Your lender will follow specific regulations to determine whether or not you qualify for an FHA home loan. Typically, the lending process depends on your down payment amount and credit scores.

FHA home loan requirements include:

Credit Score Requirements

Lenders will typically ask for your credit report to determine your creditworthiness. Most lenders require you to have a minimum credit score of no less than 580. However, if you are willing to pay a 10% down payment, you can qualify for FHA loans with a score of 500.

In most instances, your credit score determines most of the loan terms. If you have a low credit score, FHA home loans offer a better chance of owning a home.

Down Payment Requirements

Your down payment amount often depends on your credit score. FHA loans typically require a minimum down payment of 3.5%for borrowers with credit scores of 580 and higher.

Residential Requirements

You can use FHA loans only to buy or refinance your family home. The home could either be a condominium unit, a manufactured housing unit, or a home with one to four units.

Besides, this property must be your principal residence. You won't get approval for the loan if you intend to use it to finance a vacation home or a secondary home.

Lenders will typically hire an FHA-approved appraiser to determine if the home qualifies for this loan. The appraisal also determines if the house is in good living condition. The loan's amount shouldn't exceed the FHA mortgage limits.

Debt-to-income Ratio

Your total monthly debt payments also influence whether or not you'll receive an FHA loan approval. In most instances, your monthly debt payments shouldn't exceed 43%. A reasonable debt-to-income ratio is sufficient to guarantee qualification for FHA home loans.

Income Requirements

FHA home loans might not have minimum income level requirements. These loans are handy for lower-income borrowers who might not readily qualify for conventional loans.

However, most lenders need you to indicate that you have sufficient income to pay the new financial obligations.

Available FHA Home Loan Options

Are you considering getting an FHA home loan? Here are the top options you could consider.

Basic Home Mortgage Loan

Buy or refinance your home with the FHA's 203(b) mortgage. As a typical FHA loan, the primary home mortgage allows you to purchase a home with a 3.5% down payment if your credit score is 580. Remember that most lenders require you to have an equally low DTI to approve your loan.

FHA 203(k) Program

The FHA 203(k) loan program offers up to $35,000 for renovations. This loan option is ideal for anyone looking to rehabilitate, renovate, or repair their primary residence. If your home requires more work, this loan will serve you suitably.

Choose between the standard or limited FHA 203(k) loan option. The standard FHA 203(k) loan will serve you well on extensive renovation projects. Most lenders will require you to provide an approved 203(k) consultant to inspect your property and prepare a cost estimate for your project.

Typical projects that work well for this loan option include:

  • Building a garage
  • Landscaping
  • Completing structural repairs
  • Repairing or replacing your plumbing
  • Fixing a septic system or well

The limited loan option will be ideal if your rehabilitation project has fewer requirements. In most instances, this loan will offer you up to $35.000 for the renovations. The limited FHA 203(k) loan is also perfect if you are unwilling to commit to a significant project.

With an FHA 203(k) limited loan, you could:

  • Install smoke detectors
  • Build or repair your driveway or fence
  • Replace the home's gutters or roofing

It is always prudent to use the FHA 203(k) home loan for renovations that improve your home's safety.

FHA Rate/Term Refinances

The refinance mortgage lets you change your terms or lower your loan's rate with less stringent credit requirements.

Borrowers with existing mortgages could refinance their rates and terms to suit them with this loan option. The FHA rate/term refinance is also suitable for borrowers with credit that has taken a hit.

FHA Streamline

Consider the FHA streamline loan if you want extra benefits while refinancing your rates and terms. This loan option lets you get lower rates when you owe more than the home's worth.

Besides, you can get a loan with fewer documentation requirements. Most lenders will require fewer appraisal requirements and verify your income with less documentation. However, before opting for an FHA streamline, you must have made no less than six payments on your existing loan.

Energy-efficient Mortgage

Apply for the energy-efficient mortgage program to make cost-efficient improvements to the home. Most lenders require you to hire a qualified energy rater to perform a home energy assessment. From this assessment, you'll quickly find areas that need energy-efficient improvements.

Common energy-efficient improvements you can perform with this loan include:

  • Adding to your home's insulation
  • Replacing your HVAC system
  • Installing energy-efficient windows or doors
  • Replacing your chimneys

Cash-out Refinance

Have you gained significant equity on your home and are cash-strapped? The cash-out refinance lets you take advantage of the equity you build over time. With this loan, you can borrow more than you owe and keep the remaining amount.

When you refinance, you can complete property repairs or pay up part of your student loan. This cash could also help you cover unexpected bills. Besides, you'll get lower interest rates with these refinances than credit cards offer.

FHA Home Loan written on the page

FHA Home Loans Private Mortgage Insurance

FHA home loans usually come with the requirement of paying a mortgage insurance premium. This insurance ensures that your lender doesn't suffer any loss if you default.

Qualified homebuyers usually pay an upfront mortgage insurance premium. This one-time payment is payable once you close the home. With this premium, you'll need to pay 1.75% of the loan's value. Also, FHA home loan borrowers pay a monthly mortgage insurance premium. If you pay a higher down payment and have a short-term loan, your monthly premiums will be slightly lower.

Unless you pay a down payment of 10%, expect to pay mortgage insurance throughout the loan's lifespan. Borrowers who qualify with a down payment of 10% or more will only pay the mortgage insurance premium for 11 years.

Why do Many First-Time Homebuyers Love FHA Loans?

FHA loans offer multiple benefits that make them suitable for first-time homebuyers. Low to middle-income buyers also find these home loans attractive. The top benefits include:

Down payment amounts as low as 3.5%

Besides the low down payment requirements, the FHA permits down payment assistance for anyone who qualifies for these loans.

You'll only be eligible with a smaller down payment if you have high credit scores. On the other hand, conventional loans often require a larger down payment for most borrowers.

Less stringent credit score requirements

Most lenders do not prioritize good credit, meaning you can easily qualify with a shaky credit history. Also, you can get approved for this loan with a recent bankruptcy or foreclosure. You'll only wait one to three years to earn qualification for the loan.

With FHA home loans, sellers can help you pay as much as 6% of the closing costs.

FHA Loan Limits in DeSoto County, Florida

Often the FHA loan limits depend on whether you find a home in a low or high-value market area. Also, these limits depend on how many living units are available on the property you buy.

In DeSoto County, FHA home loans range from $420,680 for homebuyers who buy one living-unit home to $809,150 if you opt for four living-unit homes.

FHA Home Loans Application

Working with an experienced FHA home loan specialist can help ease the application process. First, analyze available options before settling on a loan that works best for you.

Most lenders will require you to fill out many forms and documents. Essentially, you'll have to provide a lot of information to get approval for your loan. Lenders might ask for your social security number and employment verification details. W-2 forms and pay stubs are sufficient for verifying your employment status.

Some lenders might also request your last two federal income tax returns.

Is an FHA Loan Appropriate for you?

An FHA home loan is ideal for homebuyers whose credit score needs improvement. Anyone with significant credit issues like bankruptcy can also leverage FHA home loan benefits.

Also, FHA loans require small down payment amounts, making them suitable for anyone who's not saved enough for a down payment. Additionally, the FHA lets you roll part of the closing costs into your mortgage, reducing the amount you pay upfront.

While considering an FHA loan, it is helpful to consider multiple factors before making up your mind. The top things to consider include:

Family Activities in Desoto County, Florida

Wondering how you can keep your young ones engaged once you settle down in your new home? Here are a few activities to consider:

  • Visit Treasure Alley - Explore many stores with various antiques you could use to brighten your home. Let your kids get beautiful collectibles from the diverse collections.

  • Up River Adventures - When you visit Up River Adventures, your kids will have many activities to choose from. From horseback riding to airboat tours and fishing expeditions, there's something for everyone in the area. Be sure to have fun with the baby alligators.

  • Enjoy the DeSoto County Fair - Enjoy an overall family-friendly atmosphere in January when the county hosts its annual fair. Tasty food, live music, and great activity guarantee a wholesome experience for your family.

  • Explore the Brownville Park - Camp within the beautiful oaks of Brownville Park as you create lasting memories. During the day, hire a kayak and have incredible fun in the water.

  • Enjoy the Seminole Wind Airboat tour - Spare time for an excellent ride and take in the beautiful site of alligators and birds. The boat tours and water sports will keep everyone engaged all day long.

  • Savor Hispanic Cuisines at La Zeta Mexicana - Make your way to La Zeta Mexican for lots of authentic Mexican dishes. The delicious tacos and margaritas won't disappoint you.

Get an FHA home loan for your New Home Project

Qualify for an FHA loan with less than perfect credit and a down payment as low as 3.5%. Unlike conventional loans, you'll have an easier time qualifying for these loans.

Although the government backs these loans, ensure that you shop around to find the most suitable mortgage for your circumstances.

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

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