(Mar 25, 2023)
This is where the Federal Housing Administration (FHA) comes in. The FHA is a government body that supports citizens trying to purchase homes by providing cheap, accessible mortgage loans. The agency was set up in 1934 and ran at no cost to the taxpayer, relying on the payments people make to fund its operations.
Let's take a closer look at the FHA housing loan program, focusing on its low down payment products, down payment assistance options, and how residents of Hillsborough County, Florida, can take advantage of these to achieve their home ownership ambitions.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Hillsborough County, Florida.
What are FHA Loans?
FHA loans are drastically different from conventional mortgage loans in several ways. First and foremost is their lowered down payment requirements. These loans allow applicants to purchase property with a down payment of as little as 3.5 %. Their second point of appeal is payment flexibility that borrowers enjoy as they work to pay off their mortgage. They cater to people with bad credit histories, lower incomes, minorities, first-time buyers, etc.
There are different loan packages on offer, including essential Home Purchase Loans (203b), Graduated Payment Loans (245a), Standard Refinance Loans, Reverse Mortgages, Energy Efficiency Mortgages, and Cash-Out Refinancing as well. The fact that the federal government underwrites these loans allows lenders to offer them under such favorable terms. The government pledges to cover their losses in case of default on the borrower's part.
Qualifying for an FHA Loan
Even though this program makes things much easier for everyone involved, there are several stipulations that lenders have to consider before issuing these loans. These eligibility requirements are the basic FHA standards, but individual lenders are given leeway to tighten them where they see fit. They include:
Minimum Credit Scores
According to the FHA, borrowers with a credit score of no less than 640 are eligible for loans under their program. This, however, is mostly just on paper. In practice, very few lenders will issue a loan to a borrower with a FICO score of less than 620. The housing market crash that triggered the 2008 recession, compounded by a weakened economy and high inflation rates, has made lenders more hesitant to issue loans.
Still, there's hope for borrowers as long as they can negotiate and convince lenders that they are in a position to keep up with their payments. As we mentioned earlier, the final say in this decision lies with individual lenders, so there's always a chance.
Debt-to-Income Ratios
In the financial world, a person's Debt-to-Income Ratio (DTI) is beneficial, especially concerning loans and lenders. A DTI ratio is calculated using a person's income against their total debt burden. If, for example, a person earns $100,000 a year and they have a total debt burden of $40,000 each year, then their DTI will be expressed as 40 % (40,000/100,000).
Regarding FHA loans, the program guidelines state that a borrower shouldn't have a DTI of more than 40 %. Debt here includes your mortgage payments, student loan debt, credit card debt, auto loan payments, rent, and so on, but other bills such as utilities, gym memberships, internet charges, etc., are not considered.
The DTI stipulation is to help ensure that borrowers are not taking on more debt than they will be able to pay off on a monthly or yearly basis.
However, circumstances will allow lenders to issue FHA loans to people whose DTIs exceed the suggested limit. Exceptions are often made for borrowers with impeccable credit histories, large cash reserves, or other mitigating qualities that put them comfortably in a position to keep up with their payments.
Down Payment Requirements
One of the brightest points regarding the FHA Housing Loan program is that they make it possible to receive a mortgage loan with a down payment of as little as 3.5% of the property's value. Even so, borrowers are at liberty to put more than that down, which has benefits. When you put down a higher down payment, lenders typically offer you cheaper mortgage payments, and you will enjoy lower Mortgage Insurance.
Mortgage Insurance Payments (MIP) are required on all mortgage loans with a down payment of less than 10 %.
This charge carries on for the lifetime of the loan. Should you choose to make a 5 % down payment on a 30-year mortgage loan, for example, or put down more than 10 % on a 15-year loan, you will likely enjoy significantly reduced premiums.
You can cancel your mortgage insurance payments by choosing to refinance your loan.
Property Appraisals
Before loans are issued for the purchase of any property, the FHA requirements state that an appraisal has to be made of the property to determine its condition, eligibility, and value. Property appraisals differ from home inspections, which only measure a home's livability, safety, and sanitary status.
This is essentially the same process that has to take place before conventional loans are issued, the only difference being that the FHA has its staff of dedicated appraisal experts. This exercise has to be undertaken before any loans, standard refinancing, or reverse mortgage products are issued. Property appraisals are not, however, a requirement for streamlined refinancing.
Down Payment Assistance from Florida Housing
The Florida Housing Finance Corporation provides further assistance to people hoping to access FHA Mortgage loans, provided they are Florida residents seeking to purchase property in the state.
The Florida Assist Second Mortgage Program was created to help borrowers with their down payment, closing costs, insurance, and principal mortgage reductions.
The Florida Assist program supports Floridians in various ways, including:
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Automatic qualification for any borrowers who qualify for FHA, USDA, and Fannie Mae HFA Preferred loans in all Florida Counties
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Qualified applicants may receive up to $10,000 after taking FHA or USDA-RD loans, while applicants who have taken conventional loans may receive up to $7,500
- The FL Assist program is a zero percent, deferred, non-amortizing second mortgage.
FL Mortgage Assist loans are not forgivable, even though payment is deferred. The only circumstances that will make the loan immediately payable are property sales, the satisfaction of the first mortgage, or if the mortgagor vacates the property.
Florida Assist Eligibility Requirements
While the Florida Assist Program aims to assist as many Floridians as possible, there are certain conditions and requirements that applicants must meet to receive these loans. They include:
First-Time Buyer Requirements
Eligible borrowers or partners should not have owned a housing property for three years before their loan application. This provision is designed to keep those with the means to own property unassisted from taking advantage of the program while needier cases exist. There are exemptions to this barrier, however, as follows:
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The Veteran's Exemption states that veterans who have actively served in the military, navy, or air force do not need to be First Time Buyers to qualify for the Florida Assist Program. They will, however, only be eligible for this loan if the individual in question receives an honorable discharge from their service. They must demonstrate that they meet these requirements on the mortgagor affidavit.
- The Federally Designated Area Exemption - These refer to areas of the state selected explicitly for preference to help stimulate home ownership and development. These are mainly rural, remote, or otherwise underprivileged areas. Borrowers that intend to buy property in these areas are given priority under the Florida Assist Program.
Purchase Price Limits
The program limits the value of properties that can be purchased with its assistance. All the counties in Florida have different upper purchase limit requirements. The idea behind this upper limit is to try and maintain the program's focus on helping those who need help the most.
In Hillsborough County, the upper purchase price limit for properties in non-targeted areas is $311,980. The purchase price limit in targeted areas is higher, topping off at $381,308.
Income Limits
The Florida Assist Program also limits the amount a borrower can earn in a year to qualify. Again, this is to try and ensure that the program mainly serves those in the greatest need of assistance.
This limit is adjusted according to household sizes, with the income of any resident in the household contributing towards determining the total household income.
In Hillsborough County, the limit on household incomes in targeted areas is a flat $ 88,560. In non-targeted areas, closer attention is paid to the numbers in the household. Borrowers in a 1–2-person household face a $ 73,800, while those in 3+ households have a limit of $84,870.
Credit Status Limits
The Florida Assist Program also calls for a minimum credit score for eligibility. The Florida program calls for a FICO score of at least 640, but borrowers will have had to pass all the requirements imposed by their final lending agencies.
This goes back to the Federal Housing Association's final authority on issuing loans - their guidelines give lenders plenty of freedom. Still, the decision to approve or deny loans has to abide by their guidelines.
Taking Care of Your Money
One of the biggest mistakes you can make when it comes to money management is to keep cash in your home. Even if you aren't stuffing cash under your mattress, the sheer amount of risk and possible catastrophes that can occur make this a definite no-no.
This becomes all the more critical when considering the funding required to make a down payment on a potential home.
Before finalizing your mortgage application, don't succumb to 'investing' it into anything else. Don't take the risk. Settle for simple savings or fixed accounts and let the money sit until all the loan application details have been straightened out. Such significant money should always be deposited in a reputable banking institution. You should withdraw your funds or directly transfer them by check or wire to the seller.
Things to Do in Hillsborough County, Florida
There are plenty of fun activities for you and your family in Hillsborough County. If you're planning a move to Hillsborough, here are a few local attractions sure to deliver plenty of excitement.
Visit the Hillsborough River State Park
If you love the outdoors, then the Hillsborough River State Park will be the perfect outing for you. The spacious green environment is ideal for all outdoor activities, including canoeing, kayaking, swimming, and hiking. Plenty of lush trails wind around the park, with plenty of bike lanes for those looking for something more active.
There are guides available here if you wish to learn more about the far-reaching history of Hillsborough County.
Enjoy the Box of Cubans Restaurant
If you're feeling a desire for a quick taste of authentic Hispanic cooking, then the Box of Cubans will hit the spot. This coffee and sandwich shop was established with Florida's large Hispanic population to keep their traditional flavors and way of life alive.
Visitors can enjoy Rice bowls, Empanadas, Sandwiches, and Cuban coffee. All their dishes, which they offer as delivery and ready-to-go orders, are made in-house from scratch. With many years of experience under their belt, you can be sure of an authentic, unforgettable experience.
Take in the Hidden Gems Foodie Tour
If you'd like to combine your culinary adventures with some physical excursions and sightseeing opportunities, nothing like the Hidden Gems Foodie Tour will do the job. On this tour, your party will be taken on a leisurely bike ride through the St. Petersburg neighborhood, which is a stone's throw away from downtown Hillsborough.
The tour will aim to take in as many of the stunning natural scenery and interesting sights as possible while making stops at some of the area's most celebrated and unique eateries, cafes, and restaurants. These stops are carefully selected to offer you a brief yet comprehensive look at what the community is all about.
You won't have to bring your bicycle to enjoy the tour, as the tour directors provide all the equipment you might need for hire (water bottles, helmets, and bicycles of all sizes).
Explore Lithia Springs Regional Park
Nearby Lithia Springs Regional Park is a short drive from central Hillsborough, but it is well worth the short trip. Lithia Park features a natural spring that gushes forth 72-degree water all year round.
This natural setting affords plenty of fun for all, including fishing, swimming, volleyball, and picnic opportunities. With over 45 camping sites spread out across the sprawling park, most suitable for RVs (electrical service, water/shower ready), you will not miss out on a place to reconnect with nature.
Experience Busch Gardens
This is an Africa-themed amusement park guaranteed to bring wonder and endless excitement to the young and young at heart. It has plenty of wild rids, hosts family-friendly events, a fully-functional zoo, and various attractions.
Don't miss out on the collection of roller coasters here, which include the daunting Falcon's Fury, the exhilarating Congo River Rapids, and the soothing Serengeti for the little ones in your group Express.
Final Thoughts
Homeownership is a dream most of us share, but the reality of the world we live in today means many of us to need help to achieve it. The Federal Housing Association mortgage loan program and the Florida Assist program combine to bring this dream closer to reality for countless families each year.
Because of their 3.5 % down payment and competitive payment schedules, they are a great financing choice, especially for those living a lower to middle-class lifestyle. These programs have proven themselves reliable financiers over many decades and can be relied on to provide solid backing should you ever find yourself in need of support.
(Mar 25, 2023)
