(Mar 25, 2023)
An FHA loan was designed to remove obstacles to homeownership that you may encounter when trying to secure a loan. The mortgage also has a less strict down payment and credit score requirements besides being sponsored by the Federal Housing Administration.
If it's your first time considering an FHA loan to finance a house purchase, it's important to understand how the mortgage works and its requirements. It would help if you also familiarize yourself with some down payment assistance programs lenders can use with the loan. Continue reading for more insights.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Hamilton County, Florida.
What is an FHA Loan?
Like other government-sponsored loans, FHA loans seek to bridge the gaps in the mortgage market with relatively lenient eligibility requirements. You can therefore turn to them if you aren't in a position to qualify for conventional home loans.
The FHA backing on FHA mortgages reduces the lending risk on participating lenders if you default on the loan. With this government backing, you can also enjoy a home loan with competitive interest rates. Other perks of taking an FHA loan include fair credit score limits, multiple down payment options, and low mortgage insurance premiums.
In your first home purchase facilitated by an FHA loan, you have to make a 3.5 percent down payment on the home. You can also use the mortgage in a home purchase even when you are not new in the mortgage market.
Regardless of your first-time homebuyer status, your lender can allow you to pay the closing costs as part of your monthly loan payments and apply for the loan when burdened with financial problems like bankruptcy.
The 3.5 Percent Down Payment Requirement Dissected
FHA loans have a mandatory down payment requirement, which also applies to other home loans. The down payment is usually expressed as the home's actual buying price percentage. It's also defined as the upfront amount needed to be paid to allow a lender to process your home loan.
Though lenders will base your down payment amount on your credit score, you shouldn't be worried that much. A FICO credit score of at least 580 can qualify you for a 3.5 percent down payment. Consequently, a credit score that ranges from 500 to 579 can entitle you to a down payment of 10 percent of the loan amount.
You can estimate your monthly loan payments and find out how they are affected by the down payment amount using a mortgage calculator on your lender's site or by consulting with your lender.
The good thing with an FHA loan is that you can use any gift assistance to make your down payment. However, be sure to properly document the gift assistance for it not to be confused with a loan.
Down Payments and Interest Rates on FHA Loans
Did you know that the down payment made on an FHA loan determines some of the terms of your FHA loan repayments?
A larger down payment on your next home can get you a low-interest rate or allow you to purchase a more expensive property.
Therefore, take time reviewing your lender's down payment terms before you commit to making the payment.
FHA Mortgage Insurance
FHA mortgage insurance is a kind of insurance policy imposed on FHA loans to help minimize lending risks on the lenders' side. It is usually a requirement due to increased defaulted loan payments and delinquencies. Expect to pay insurance premiums on an FHA loan since the mortgage has a low down payment option.
You'll have to pay mortgage insurance if you make your monthly loan payments. However, your lender can make an exemption for you, allowing the payments to be made for an 11-year term if you make a 10 percent down payment.
Mortgage insurance on FHA home loans takes the form of an upfront mortgage insurance premium and annual premium payments. The upfront payment totals 1.75 percent of your initial loan amount, while the annual payments, which are based on the mortgage term, loan-to-value ratio, total loan amount, and down payment amount, total between 0.45 and 1.05 percent of the FHA loan.
FHA Mortgage Insurance Vs. PMI
Mortgage insurance premiums on government-sponsored loans like FHA loans are no longer similar to PMI (private mortgage insurance) requirements on conventional mortgages as of 2013.
This means you won't have to reach 22 percent equity in a home financed by an FHA loan for your lender to remove the mortgage insurance requirement.
FHA Loan Limits for Hamilton County, Florida
Meeting the FHA's county-specific loan limits is an essential approval requirement for FHA loans. With a limit imposed on the mortgage, you can only take a loan amount that the Federal Housing Administration can guarantee.
The FHA loan limits across 3,188 counties in the US were increased by the Department of Housing and Urban Development in 2022. These limits remained the same in 45 counties across the country. You can expect an FHA loan limit of $420,680 when purchasing a property in a low-cost county and $970,800 when using the loan to finance a home in a high-cost county.
Four pricing tiers are imposed on FHA loan limits, including a standard, mid-range, high-cost, and particular exception tier. Most counties in the US are within the mid-range category, meaning they have a moderate cost of living.
If you plan to purchase a home in Hamilton County, Florida, using an FHA loan, note that the loan limits depend on the local housing costs and housing types that are available for sale.
Expect an FHA loan limit of $420,680 if you want to buy a single-family home and $651,050 for a duplex. You may also qualify for a maximum of $538,650 when financing a triplex with an FHA loan and $809,150 when buying a four-plex with an FHA loan.
Down Payment Assistance Programs from Florida Housing
Florida Housing (the Florida Housing Corporation) understands that making a down payment on government-backed or conventional home loans doesn't have to be challenging.
Along these lines, FL Housing offers down payment and closing cost assistance in the form of a second mortgage to qualifying home buyers.
The two FL Housing-sponsored down payment assistance programs you can sign up for include the following:
The Florida Assist (FL Assist)
The Florida Assist program is an FL Housing down payment assistance program catering to conventional, USDA, FHA, and VA loans.
It offers a second mortgage at a zero percent non-amortizing rate totaling $10,000 that is repayable in 30 years. The second mortgage is unforgivable, but the loan repayments can be deferred.
The Florida Homeownership Loan Program (FL HLP)
Also referred to as FL HLP, this down payment assistance program from Florida housing offers a second mortgage at a 3 percent fully amortizing rate.
The maximum amount you can get on the second mortgage is $10,000, which is repayable in 15 years with the option of deferring the repayments.
Hiding Money for Your Next Home Purchase Under the Mattress - Why It's a Bad Idea
While advancements in modern banking are making it easier to save and retrieve money with reduced risks, there are still cases of people hiding money under the mattress. Lenders and real estate agents may assume you got the money from an illegal source or activity. They fail to understand that the hidden money won't have a paper trail when looking to buy a home.
If you consider hiding money in your house, consider the difficulties you'll go through when raising the down payment amount and paying the closing costs. You won't have any way of verifying the source of the cash and proving that it reflects your financial stability before lenders consider you for a home loan.
Your home loan application can fall through if you can't verify your income or assets. It's also challenging to use the mattress money to verify your income.
What to do with the Hidden Money
Banks and other financial institutions offering savings accounts exist for one reason. To make it easier to save and retrieve money. In this case, consider keeping the hidden money in a savings account with a trusted financial institution for at least 60 days for the cash to be included in your bank statements.
Consider the limits that the bank imposes on deposits made. Don't deposit large lump sums in the account since this may raise the alarm with the IRS, prompting your account to be frozen for suspicious activity. You should also have the cash deposited not less than 69 days before applying for a home loan or reviewing your homeownership options.
Top Five Fun Activities for Kids in Hamilton County, Florida
Can a county in Florida with just 14,000 residents spread across one city and two towns capture the true essence of Old Florida? That county is Hamilton County, situated in the north-central part of the Sunshine state. A lot can be said about this county's exciting sceneries and recreational opportunities.
Though Hamilton County settled about 200 years ago, more people began flocking the county thanks to the most recent construction of the two-lane Highway 41 (which embodies the pre-interstate area).
You and your family may consider living there to enjoy the moonlight dancing on the Suwannee River, night-blooming jasmine, and the paradise of magnolia blossoms. And there's more to what your kids can do in Hamilton County, Florida, as discussed below:
Wildlife Viewing and Hiking at Stephen Foster Folk Culture Center State Park
Strategically situated on the banks of the magnificent Suwannee River, Stephen Foster Folk Culture Center State Park is a tribute to Stephen Foster. Foster is an American composer credited for his excellent songwriting on "Old Folks at Home," a song that made Suwannee River famous.
At the state park lies a museum featuring exhibits to honor Foster's most popular songs. You can hear Foster's music from the 97-bell carillon at the state park throughout the day.
Besides absorbing Foster's songwriting genius, your family can engage in wildlife viewing, canoeing, bicycling, and hiking at the park. These activities are powered by miles of trails that pass through some of the picturesque areas of North Florida. For an overnight visit, your family can stay in a cabin or full-facility campground.
Stephen Foster Folk Culture Center State Park hosts the infamous Florida Folk Festival every last weekend in May (memorial day weekend). Other special events you may enjoy at the park include an antique tractor show, a holiday light display, a regional quilt show, weekend retreats, and concerts.
Canoeing and Kayaking Courtesy of American Canoe Adventures
Since 1995, American Canoe Adventures has been offering affordable kayak and canoe trips on the Suwannee River with top-notch shuttle services. The canoeing and kayaking service seeks to make your experience on the magnificent river as enjoyable as possible.
You can enjoy a kayak or canoe trip along the Suwannee River with your kids, starting from the Okefenokee Swamp and heading to the scenic Gulf of Mexico, lying in Suwanee town. You can also buy or rent canoes and canoes with life vests and paddles.
Take a Tour of McCulley Farms
McCulley Farms captures North Florida's natural wonder and history and has been doing so as a family-operated farm since 1915. The site is a gateway to some of the most scenic trails you'll ever find in Hamilton County and a great link to the frontier days of the Sunshine State.
You and your kids can check out the original Wells log cabin and the pioneer cemetery or go down the canopy lanes that pass through the Withlacoochee floodplain toward the Withlacoochee River.
The farm equipment, tractors, farm buildings, and cattle operation at McCulley Farms is a clear reminder of old farming activities in North Florida. There's also an old farmhouse (the old McCulley Farmhouse) constructed in the 1900s that reflects these ancient times. Surprisingly enough, some of these structures at the farm are still in use today.
Outing at The Old Hamilton County Jail and Historical Museum
If your children enjoy learning the history of Hamilton County, be sure to take them to the Old Hamilton County Jail and Historical Museum. The museum is divided into the men's jail, the women's jail, and the sheriff's home, which are still architecturally appealing. In particular, the sheriff's home features a Victorian design with wallpaper and high ceilings that will draw you in.
To spice up things, you can take your children into the old-timey kitchen at the facility and ask them to guess which room they're in. You'll be surprised that the lack of a modern stove and running water in the building will make it quite difficult for them to guess correctly. You'll also witness some incredible museum artifacts donated by families that once occupied the home.
Shop Antiques at the Adams Country Store
The Adams Country Store is a typical commercial structure with a false facade constructed in ancient times. As a historic store, it features stocked century-old shelves and counters with collectibles and antiques that perfectly bring out the Old Florida feel in White Springs.
The place was once used as a cotton warehouse, making it a historical gem in Hamilton County, Florida. Currently operating as Suwannee Hardware and Feed Store, the antique store has some of the items you would see in 1893. It's a great spot to shop for local art and crafts while enjoying the antique vibe in the air.
Summing up
All in all, FHA loans seek to make homeownership opportunities for borrowers with low to moderate income more widespread across the country. You can take an FHA home loan if you have little down payment savings and plan to finance your next home purchase with a mortgage.
Like other counties in the Sunshine State, Hamilton County, Florida, is highly appealing for new homebuyers. Lenders in this county have a more lenient credit score and down payment limits. The loan limits are also favorable for any property you're looking to buy.
(Mar 25, 2023)
