Skip to content
Fact Checked by Experts

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

If you're a first-time home buyer in Escambia County, you are probably scouting to find a suitable home loan option. An FHA home loan is ideal given that it has less strict down payment and credit requirements. The Federal Housing Administration (FHA) backs these loans, ensuring prospective homeowners can quickly achieve their homeowning dream.

You can qualify for this loan with a credit score as low as 500. Besides, if you have a score of 580, you can secure financing with a down payment of 3.5%. Otherwise, most lenders require you to put down at least 10% of the home's value.

If you are in debt or have issues with your credit score, don't hesitate to apply for an FHA loan. Read on to learn more about FHA home loans, their requirements, and how you can make the most of this mortgage option.

Understanding FHA loans Further

FHA home loans are FHA-insured mortgages with lower minimum credit limits and down payment options. Essentially, the FHA ensures that your lender won't suffer loss if you default on your loan.

Government backing contributes to the attractive loan requirements that usually appeal to many first-time home buyers. However, first-time home buyers are not the only people who can qualify for these loans.

Borrowers can access different FHA loan terms depending on the program they choose. However, the terms attract borrowers who couldn't qualify for conventional loans or afford large down payments.

Some of the top benefits of FHA loans include:

  • Lenders typically accept lower down payment amounts
  • You can qualify for the loan with a lower credit score
  • You can roll the closing costs into your loan
  • Financial issues or bankruptcy might not hinder you from qualification

While the FHA home loans are slightly lower than conventional mortgages, they vary by program and fluctuate over time.

FHA Loan Requirements

You must meet specific qualification criteria to get approval for an FHA home loan in Escambia County. Typically, your lender will require you to meet these qualification requirements.

Credit Score Requirements

It is always helpful to scout around to find the most suitable lender to match your specific needs. A minimum credit score of 500 should be enough to secure the FHA loan. Other lenders might require a minimum credit score of 580 before approving your loan.

Down payment

You can get financing with a 3.5% down payment amount. However, most lenders determine the down payment based on your credit score.

If you have trouble raising your down payment amount, consider applying for the available down payment assistance programs from Florida Housing. You could opt for the Florida Assist Second Mortgage Program, which offers up to $10,000. Alternatively, you could choose the Florida Homeownership Loan Program, which has a 3% interest on the amount you receive.

Once you get this amount, open an account and deposit the money before closing the home. This is a safer option than keeping this amount in your house.

Residence Type

FHA home loan approval is only possible for borrowers who intend to use the home as their primary residence. This requirement means you can't use the FHA loan to purchase a second home or an investment property. Besides, most lenders expect you to occupy the purchased home within 60 days of closing.

Besides, your lender will ask that an FHA-approved appraiser appraises the house. Your lender ensures that your home doesn't violate FHA's limits with a home appraisal.

The home also requires an inspection to ensure it meets minimum eligibility standards. During the inspection, appraisers will be on the lookout for:

  • Cracks in the home's foundation
  • Anything that blocks access to the property
  • The working order of the home's major systems
  • Damaged roofs
  • Missing handrails
  • Peeling or chipped paint that can contribute to lead hazards

Closing Costs

Upon securing the FHA home loan, you must set aside 3% to 6% of the purchase price for the closing costs.

Mortgage Insurance Premium

Be prepared to pay an upfront insurance premium of 1.75% accompanied by a monthly insurance fee.

FHA Home Loan Application and Underwriting

Working with an experienced FHA-approved lender from the onset will ease the loan application process. Typically, the loan application process will involve showing proof of income and performing credit checks. Besides, lenders might require you to demonstrate that you can raise the down payment amount.

During underwriting, your lender will ask for additional documentation, including:

  • Your credit report
  • An FHA-approved appraisal
  • Recent pay stubs, tax returns, or bank statements to verify your income
  • Employment history

Who Should Consider FHA Loans

Although FHA home loans don't have specific income requirements, they are best suited for low-to-moderate citizens. Anyone who can't raise the down payment amount needed for other loans or experiences difficulty qualifying for conventional loans should consider FHA home loans.

You will find FHA home loans particularly helpful if you are:

  • A first-time homebuyer who can't raise a sizeable down payment
  • Rebuilding your credit
  • A senior who wants to convert home equity into cash

Diverse FHA Loan Options in Escambia County, Florida

Borrowers can leverage different home loan programs that fit their circumstances. Choose from a comprehensive list of programs that offer fixed-rate mortgages, adjustable rates, refinancing options, and improvement loans.

The FHA designed these programs to meet the needs of different home buyers. Some of the most popular FHA home loan programs include:

FHA Energy Efficient Mortgage

With this loan option, you can make energy-efficient improvements to the house you buy or refinance. The energy-efficient mortgage helps you lower your monthly utility bills significantly. Besides, you won't need to take an additional mortgage to improve your property.

At a relatively low cost, you'll get a chance to make valuable improvements to your home. Borrowers can use this loan to improve one- or two-unit homes. Other home improvement projects that the loan covers include:

  • Water heater installations
  • Home insulations
  • Roofing improvements
  • Purchasing energy-efficient appliances
  • Installing energy-efficient windows and panes
  • Assorted heating and cooling systems

To get approval, you'll need a home energy rater to verify that your home will be energy-efficient upon completing the improvements. Also, these assessments offer lenders your estimated monthly energy savings.

With an FHA energy-efficient mortgage, you only need to qualify for the amount used to purchase your home. Also, this mortgage lets you increase your total loan amount for improvements by up to:

  • 5% of the property's value
  • 115% of the median price of a typical single-family home in your residential area

Streamline Refinancing

Are you looking to streamline the underwriting on your existing loan? The Streamline refinancing option will serve you suitably. This loan lets you improve the terms of your existing FHA home loan.

Besides, you'll skip a home appraisal and income documentation when you opt for an FHA streamline refinance.

Cash-out Refinance

Before applying for this loan, the FHA requires you to have lived in the home for no less than 12 months. Your employment documentation or utility bills prove that you've used the home as your primary residence. You can refinance up to 80% of your new home's value and get cash on your equity.

Compared to other cash-out programs, FHA cash-out refinances allow more flexible DTI ratios and lower credit scores. Borrowers need to meet FHA minimum refinance requirements to qualify for a refinance. The loan's requirements include:

  • At least 20% equity in your home
  • A minimum credit score of 600 for most lenders
  • Consistent mortgage payments over the last 12 months
  • A DTI ratio below 43%

While considering this loan option, ensure that your new loan doesn't exceed Escambia County's loan limits. If your home's value has appreciated since you bought it, FHA home loan limits might cap the loan amount you'll receive.

You can use the cash-out funds for different uses, including:

  • Student loan refinancing
  • Consolidating existing mortgages
  • Credit card debt consolidation
  • Refinance adjustable-rate loans into fixed-rate loans

Rate and Term Refinance

A rate and term refinance loan are ideal for borrowers having trouble with their mortgage payments. This loan option lets you pay less interest and fewer monthly payments. Essentially, borrowers can change the terms on the current loan and make them more favorable.

FHA 203(k) loan

Does your new home require renovations or improvements? Roll all your renovation costs into a single loan with the FHA 203(k) option. Essentially, this loan option adds your home improvement and repair expenses into your total loan.

Remember that you'll need to find an FHA 203(k) loan that aligns with your income, credit history, DTI ratio, and credit score.

Happy young couple sitting on couch and celebrating moving day in new house

How does the FHA Mortgage Insurance Work?

Usually, lenders require all eligible FHA loan borrowers to pay Private Mortgage Insurance. PMI is security for the lender if you fail to make your mortgage payments.

Upon qualifying for an FHA home loan, you must pay into two mortgage insurance programs.

  • Upfront mortgage insurance - With this premium, the FHA requires you to pay a premium amount that equals 1.75% of your loan amount. It is always advisable to add this amount to your loan balance and pay it at closing.

  • Annual mortgage insurance - Typically, annual mortgage insurance will be between 0.45% and 1.75% of your loan amount. Your lender charges you this amount for specific years, and you'll need to make monthly payments.

FHA Home Loan Limits in Escambia County, Florida

In most counties, the maximum loan limit for low-cost areas is $420,680. This amount can go up to $970,800 if your home is in high-value real estate markets like New York and California.

In Escambia County, you can get $420,680 for a one-living-unit home. If you opt for four living units, then you'll get a limit of $809,150.

Benefits of FHA Loans in Escambia County, Florida

FHA home loans offer various benefits that make them suitable for first-time home buyers and other borrowers who might not qualify for other mortgages. Some of the benefits you can leverage include:

Low credit score requirements

Depending on your lender, you can qualify for an FHA loan with a credit score as low as 500. You can quickly qualify for the FHA home loan if you have less than perfect credit. Besides, you can submit proof of compensating factors to strengthen your application. These can include:

  • Low debts
  • Increased earning potential
  • Verified cash reserves
  • Residual Income
  • Significant non-taxable income

Flexible Borrowing Options

You can settle on a fixed or variable interest rate loan with FHA loans. If you opt for an adjustable-rate mortgage rate, expect your monthly interest rates to change over time.

Besides, you can also choose between a 15-year or a 30-year loan term. Essentially, you can assess your financial position and work with loan terms that suit you.

However, most lenders prefer to offer 15-year fixed FHA loans to people with lower credit scores. This loan option helps you pay off the loan faster as you save on accruing interest rates. Also, you won't need to worry about your mortgage payments changing when market rates fluctuate.

Another benefit of the 15-year fixed loan is that you can clear your home loan whenever possible without expecting any prepayment penalty.

Low Down Payment

Unlike other mortgages that require you to have good credit to put down a small amount, FHA loans allow borrowers to put down as little as 3.5. For the best conventional loan rates, you can pay as much as 20% as your down payment.

Flexible Debt-to-Income Ratios

Most lenders expect you to have a low DTI ratio to guarantee that you'll be able to remit payments for your new financial obligation consistently. However, FHA loans have less strict DTI requirements, increasing the number of people who can access this loan.

Minimized Waiting Periods

People who've experienced bankruptcy or foreclosure often shy away from applying for home loans. The reason is that they'll need to wait longer to qualify. FHA home loans provide a lifeline for such individuals.

These loans have a shorter waiting period, ensuring that such borrowers can bounce back and move towards their goal of owning a home. While conventional loans have a waiting period of four years after bankruptcy, you can qualify for an FHA loan two years after discharge.

Reduced Closing Costs

Typically, FHA loans closing costs average around 3-5%. Borrowers can opt to roll part of these costs into their loan. Also, sellers can pay part of the sales price to reduce your closing costs. During the negotiation process, you can ask a seller to pay:

  • Property taxes
  • Lender fees
  • Homeowners Insurance
  • Escrow fees
  • Title insurance

With proper negotiation, cash-strapped borrowers can get new homes without breaking the bank.

Affordable Mortgage Insurance

While your FHA mortgage insurance increases your payments, it is handy in helping you get home. This insurance is necessary to protect lenders from default, ensuring they approve more FHA loans and lend money.

Low-Interest Rates

FHA loans have some of the lowest interest rates in the market. When comparing interest rates, ensure that you also consider the insurance rates on different loan options.

Activities for kids in Escambia County, Florida

Do you want to give your kids endless fun in Escambia County? Here are the top fun activities for your young ones.

  • Explore Fast Amusement Fun and Attractions - Pensacola city offers a variety of amusement parks where you can tire your kids with arcades, mini-golf, or go-carts. These parks also provide a dining or snack option to guarantee more fun.

  • Visit the Gulf Breeze Zoo - Stroll through the Gulf Breeze Zoo exhibits and learn about different creatures. Enjoy the train ride that lets you see hippos and gorillas.

  • Explore Local Parks - The trails of Escambia County offer a mix of saltwater marshes, dunes, and lush fine forests. Spare some time for the Big Lagoon State Park

Family Activities in Escambia County, Florida

Escambia County offers multiple family activities, including:

  • Beach Adventures - Hit Pensacola Beach, which has miles of emerald green water and impressive white sand. You could build sandcastles, hit the waves, or shell.

  • Camp at the Gulf Islands - Experience a bit of history at the Gulf Islands National Seashore. You could also enjoy unspoiled sceneries or the more secluded beaches.

  • Enjoy Mexican Dishes at Cactus Cantina - Share tasty, fresh Hispanic cuisines whenever you stop by Cactus Cantina. Try the 3 Amigos Cheese Dip, Cantina Sampler, or Carnita Fries.

Consider an FHA loan for your Home Purchase in Escambia County, Florida

Do you have a low credit score? Are you short on cash for a down payment? Consider using an FHA home loan to finance your home purchase project. This government-backed mortgage loan helps you purchase a home with less-stringent financial requirements.

If you've experienced bumps in your financial history, FHA loans will bail you out when you need to own a home. Don't hesitate to reach out to a local FHA-approved lender to help you secure this loan.

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.

Find The Right Mortgage

For more than 20 years, Phil have been helping customers achieve their home purchase and refinance goals by providing them with invaluable resources and support.

Schedule a FREE Consultation
Phil Ganz

Subscribe to Get Your First Time Homebuyer Checklist

Sign up for the weekly newsletter to stay up to date on the latest real estate market trends, loan news, and so much more!