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

Highlands County is a charming hideaway in Central Florida. There’s a lot you can do in Highlands County, given its array of ways to head out of the house, amazing sights to see, and plenty of things to do. And suppose you’re lucky to cut it for a low-down FHA loan; owning a home in these parts of the Sunshine State is a feasible option.

“How?”; you may ask. Well, read on as we delve deeper into discussing FHA loans, their eligibility requirements, benefits, and so on.

What are FHA Loans?

An FHA loan is simply a form of mortgage guaranteed by the Federal Housing Administration that has lenient credit requirements than most conventional mortgages and allows for as little as a 3.5% down payment. You can use FHA loans to purchase a home, cover renovation costs, or refinance your mortgage.

While it’s easier to assume that FHA loans are offered directly by the Federal Housing Administration, they are not.

Instead, the FHA only insures these loans to protect the lender against the loss of borrowers defaulting on their loans, and borrowers will need to apply through third-party FHA-approved lenders such as credit unions and banks.

Categories of FHA Loans

If applying for an FHA loan is on your cards, you have a few options to consider.

  • Conventional Mortgage - The FHA Conventional Mortgage is more like a traditional home loan. In other terms, it’s essentially the FHA loan option available to applicants wishing to acquire their primary residence - this can be a multi- or single-unit home, and borrowers have the chance to decide if they prefer an adjustable or fixed rate.

  • Home Equity Conversion Mortgage - This FHA lending option best suits senior homeowners who want to turn a portion of their equity into cash.

  • Energy Efficient Mortgage - Borrowers can use an EEM to fund energy-efficient improvements or home repairs. Among the things you can upgrade with this loan include your insulation, furnace, or thermostat systems. Nevertheless, the modifications must be cost-effective, and a professional property assessment is mandatory for you to qualify.

  • 203(k) Rehab Loan - A 203(k) Rehab Mortgage entitles you to a mortgage and additional funding to cover the expenses of home renovations.

  • Construction to Permanent Loan - As the name implies, this loan is a steal for applicants looking to buy land and build a new house from the ground up.

  • Title I Home Improvement Loan - You can use the Title 1 Property Improvement Loan to complement your 203(k) mortgage or finance your home upgrades.

FHA Loan Qualifications

When looking for a mortgage, it’s typical for the lender to look at crucial eligibility requirements. An FHA loan is no different. However, it’s critical to recognize that the qualifications discussed here are the minimum set by the FHA, and lenders often have different, varied terms.

A quick hint? Compare offers from various participating lenders to ensure you obtain the best FHA loan conditions and interest rates.

Continue reading to learn about the minimum FHA loan requirements in detail.

Credit Requirements and Down Payments

One of the many benefits of FHA loans is that they have lenient credit score requirements – borrowers with scores as low as 500 (rated “very bad” by FICO) may qualify.

Typically, a credit score of 500 to 579 puts you in good standing to apply for an FHA loan. That’s not all, though; you’ll also need to put 10% down to make that happen. Nevertheless, the amount of down payment varies depending on your credit score; applicants with a credit score of 580 or higher could qualify for an FHA mortgage with as little as 3.5% down.

However, as previously stated, these requirements are imposed by the FHA, and individual FHA-approved lenders may choose to ask for better FICO scores. In reality, due to the combined implications of the COVID-19 pandemic and the economic slump, most lenders upped their baseline credit rating requirements, with some demanding a 620 at the least.

The good news is that you might capitalize on gift assistance rather than using your savings to fund your down payment. However, you must ensure that the appropriate documentation clearly states that the aid you got was a genuine gift and not some disguised loan.

In addition, borrowers in Florida can take advantage of down payment assistance of up to $10,000 from the Florida Housing Finance Corporation, making the deal even tastier.

Mortgage Insurance

A mortgage insurance premium is needed for all FHA loans to protect the lender from incurring a loss if an applicant goes bankrupt and cannot repay their mortgage.

You may be obligated to pay the mortgage insurance premium (MIP) for the duration of your FHA loan. However, applicants who put down 10% or more will only have to pay the mortgage insurance charge for 11 years.

FHA mortgages employ two approaches to compute insurance premiums:

  • When you secure a mortgage, you must pay an upfront mortgage insurance fee of 1.75 percent of the amount borrowed. Fortunately, you can roll this charge into your overall loan amount.

  • A yearly mortgage insurance premium. Usually, this figure lies between 0.45% and 1.05% of your loan amount, depending on your LTV, loan duration, and size.

Debt-to-Income Ratio

To be qualified for an FHA loan, you must have a debt-to-income ratio of no more than 50. This implies that your total monthly loan payments, including those whose payments are currently in deferment, should not be more than half your gross income.

Assuming you have student loans that you aren’t actively repaying, the FHA mortgage underwriter will take 1% of their total as your monthly payment. On the other hand, when assessing your DTI for any other deferred loan, the underwriter will use 5% of the amount.

Property Approval

The property you plan to buy with your FHA loan, whether a multi-unit home, a manufactured home, a condominium or a house, must match the FHA’s minimum property standards. An expert appraisal is needed, according to the FHA. Nonetheless, it is vital to remember that the appraisal should be carried out independently of a home inspection.

These criteria are primarily in place to make sure that the property you purchase is a smart buy and meets essential livability and safety conditions.

With a 203(k) rehab mortgage, you must complete two appraisals – one to assess the property’s current condition, which we call an “as is” appraisal, and another to estimate the property’s worth following repairs, known as an “after renovations” appraisal.

Evidence of Stable Employment

Remember that FHA loans must be repaid, and whichever lender you pick will want an assurance that you can comfortably bring home the bacon. One approach to establishing these guarantees is to ask for evidence of recent, stable employment. Your tax returns, income statement, and balance sheet are ideal examples of the documentation likely to be requested.

Suppose you’ve been self-employed for more than a year, but less than two years, you may still cut it for an FHA loan. Nonetheless, solid employment and income history before becoming self-employed could significantly increase your chances of being eligible.

A sufficient income

To cut it for an FHA home loan, ensure your property taxes, homeowner’s insurance, HOA fees, mortgage insurance, and mortgage payments do not surpass 31% of your gross earnings. This is referred to as the front-end ratio.

Concurrently, your monthly loan payments and other consumer debts should not exceed 43% of your pretax income.

FHA Occupancy Guidelines

The FHA requires the borrower to inhabit the new residence within sixty days of closing. It’s also a requirement that you make the acquired home your primary residence, which the FHA defines as one in which you live for most of the year.

It’s vital to understand that breaching or ignoring these occupancy requirements may be declared fraudulent, and the borrower may risk criminal or civil prosecution.

In addition, borrowers cannot have multiple FHA loans open simultaneously. So, if you plan to buy another house or relocate sooner, you should talk to your lender about other options.

FHA Loan Limits in Highlands County, Florida

In Florida and all other states, FHA loan limits vary by county, depending on local housing prices and house types. The following are the FHA loan limits for Highlands County:

  • Single unit - $420,680
  • Two units - $538,650
  • Three units - $651,050
  • Four units - $809,150

Residential buildings modal and easel with FHA loan

Upsides of FHA Loans

FHA loans are a steal to borrowers with less chance of getting a mortgage through private lenders – possibly due to low credit ratings, tight down payment requirements, or low credit ratings.

Simply put, FHA loans have a few benefits over their conventional counterparts. A few key ones include:

Low Down Payment

Unlike conventional mortgages, FHA loans are government-backed and come with a far lower down payment. As previously said, a fico score of 580 or higher could offer you the rare chance of spending as little as 3.5% for the mortgage down payment.

On the contrary, applicants with fico scores between 500 and 579 must pay 10% for the down payment. Whichever the case, borrowers enjoy relatively lower down payment amounts than they would have paid for typical alternatives.

Flexible Credit Score Deadlines

Suppose you’ve had a hard time making timely payments in the past or haven’t yet attained a good credit rating; achieving the 620-credit score that’s often needed to qualify for a traditional mortgage might prove pretty challenging.

On the other hand, FHA loans are slightly more flexible regarding credit score requirements. As such, applicants with low credit ratings (as low as 500) may be eligible. Nonetheless, if your credit score is 580 or higher, you will have a decent qualifying chance with most FHA-approved financiers.

You Get to Build Equity Faster

Considering how these mortgages work and everything they offer, FHA loans enable applicants to purchase homes sooner, allowing them to build equity quickly.

Rather than renting while you work on growing your credit or saving for a down payment, FHA loans give you the chance to become a homebuyer much sooner.

No Imposed Income Limits

There are no set income criteria that you must meet to be considered FHA mortgage eligible. Nevertheless, this does not translate to FHA loans being available to everyone.

Instead, any lender you pick will request evidence of a stable job history, which they can validate through your bank records, federal tax return statements, W-2s, pay slips, etc.

Applying for an FHA Loan in Highlands County, Florida

Remember that FHA loans are offered through third-party FHA-approved lenders, not directly by the Federal Housing Administration. To apply for an FHA loan in Highlands County, follow these simple steps:

  • Explore different FHA-approved banks or lenders - Evaluate the prices and rates of several lenders to ensure you get the best deal available.

  • Fill out the loan application - Keep relevant information such as your down payment, monthly debts, and income at your fingertips.

  • Allow your lender to validate your credit rating - The lender must verify that you meet the FHA credit score criteria.

  • Give a two-year job and earnings history - Provide supporting documentation, such as pay stubs, federal tax returns, and W-2s, not to mention your employers’ contact information.

  • Elaborate on your down payment source - If you have a high DTI or a fico score of below 580, the lender might request to go through your bank statements or a letter clarifying where you expect to obtain the money to finance your down payment and closing costs.

  • Document and explain any deferred federal debt - Through the CAIRS system, lenders can now determine whether you have any outstanding government debts or student loans, which, if present, you must account for.

Is Buying a Home in Highlands County, Florida, Using Your FHA Loan Advisable?

Yes! With all that Highlands County has to offer, using your FHA mortgage to get yourself a home here is a worthwhile decision. The neighborhoods are safe, the towns are majestic, not to mention all the fun you can have while here.

Speaking of fun, Highlands County swanks multiple attractions and fun things to do with your family. A few excellent recommendations include:

Highlands Hammock State Park

Situated outside Sebring off US Route 27 Highlands Hammock State Park is one of central Florida’s most conserved and pristine places, with a complex environment that acts as home to a broad assortment of wildlife.

The park spans over 9,000 acres and has been publicly accessible since 1931. With many incredible sights to see and activities to do, amateur photographers, birdwatchers, bikers, and hikers like to flock here in large numbers.

It’s also an excellent destination for camping and fishing buffs, and suppose you’re into wildlife photography, there’s plenty to see, from gators, bobcats, deer, and more.

Maxwell Groves

You get an orange; everybody gets an orange at Maxwell Groves in Avon Park. Having been in business for nearly nine decades now, this citrus-centric country store should be your spot whenever you’re looking for something to cool down during a warm afternoon.

Pass by and treat yourself to your favorite fruit, freshly squeezed OJ, local honey and wine, jellies, jams, or their in-house dairy-free soft serve ice cream.

Sebring Soda Shop

For a noon pick-me-up, stop by Sebring Soda Shop and explore an array of over 300 flavors to find what satisfies your sweet tongue. Drink these antique, artisanal, craft sodas, then keep the bottles to create your collection.

With taste varieties from all over the world, every bottle of pop has a story to tell. The best part? All the exciting and distinctive offerings are available to browse for free.

Don Jose Mexican Restaurant

Initially established in 1970 in Mexico, the Don Jose Mexican Restaurant is your go-to spot for the best Spanish cuisine in town.

The restaurant uses the same menu as the Mexican outlet, providing Floridians with a genuine taste of Mexican food options such as the great salsa, tamales, Chiles Rellenos, and fresh guacamole.

Set to Move to Highlands County, Florida?

As demonstrated in this post, owning a property in Highlands County, Florida, is simple, even for borrowers whose credit isn’t that good or who can’t afford to put money down for a conventional mortgage. All you have to do is get a low-down FHA loan!

So, why sit there and wait? Get your FHA loan and become the newest homeowner in Highlands County, Florida, today!

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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