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

Remember when the only way to get a home loan was with a 20 percent down payment? And if you couldn't save enough for the down payment amount, conventional home loans would be out of your reach. Today, you can become a homeowner with much less, thanks to FHA's low down payment home loan.

Once you meet the eligibility requirements, you may qualify for an FHA loan by putting down as little as 3.5 percent. You can also count on several sources for the down payment amount. These sources include grants offered by down payment assistance programs and gifts from loved ones.

FHA loans are available to applicants all around the country, the state of Florida included. Here's what they entail and the down payment assistance options you can pursue when applying for the loan in Holmes County, Florida.

What is an FHA Loan?

The Federal Housing Administration understands most low to moderate-income homebuyers struggle when trying to qualify for conventional loans. To help them afford homes without being subjected to harsh eligibility requirements, the FHA introduced FHA loans to the home loans market. The FHA also insures these loans to reduce lenders' risks when originating them.

FHA loans are readily available in the mortgage market with low income and credit score requirements and low down payment options. They also require mortgage insurance, charged as an upfront fee and annual premiums.

The lenient income and credit requirements, as well as the low down payment on FHA loans, make them ideal for first-time homebuyers. You may also consider applying for the loan if you are not new in the home buying market.

Either way, you stand a chance of qualifying for the mortgage if facing financial challenges such as bankruptcy. Your lender can also agree to roll the FHA closing costs into your monthly mortgage payments.

What Makes the 3.5% Down Payment Requirement Attractive?

The 3.5 percent down payment requirement in FHA loans is calculated as a percentage of a home's total purchase price. It is also the upfront amount lenders require you to put down to be conducted for an FHA loan.

Your credit score (a number ranging from 300 to 850 used to indicate creditworthiness) comes into play when lenders decide the minimum down payment they need you to make on the loan. Along these lines, having a FICO score of 580 and above can get you a minimum down payment of 3.5 percent.

And if you're in a position to raise a down payment of 10 percent and have a FICO score in the range of 500 to 579, your chances of qualifying for an FHA loan may improve.

Your lender can allow you to make down payments with cash derived from gift assistance. However, the gift should be appropriately documented to avoid confusing it with a loan.

Check with your lender's mortgage calculator to estimate your monthly FHA loan payments and see the impact the required down payment amount has on them.

How FHA Down Payments Work

Did you know that the down payment you choose to make on an FHA loan can affect some aspects of your loan repayments? For instance, putting a significant amount down on a home can get you a competitive interest rate and a more costly property.

Despite this, the 3.5 percent down payment on FHA loans still stands whether you choose to go with a sizeable down payment amount.

FHA Mortgage Insurance

The term "mortgage insurance" may sound familiar if you have once shopped for a conventional home loan. In the context of FHA loans, it is used to describe the mortgage insurance premiums (MIP) that you have to pay to insure the FHA-approved lender against potential financial losses if you cease paying your loan.

Mortgage insurance premiums on FHA loans take the form of an upfront fee of 1.75 percent of the principal loan amount. They also take the form of an annual fee ranging from 0.45 to 1.05 percent based on your loan-to-value ratio, mortgage term (or length), down payment amount, and total loan amount.

In most cases, the MIP requirement extends over the life of your FHA home loan unless you put 10 percent down on the home, which will prompt you to pay the premiums only for 11 years.

How Does FHA's MIP Compare to Private Mortgage Insurance

Mortgage insurance premiums charged on FHA loans used to be the same as private mortgage insurance required on conventional home loans before 2013. At that time, your lender would cancel the mortgage insurance requirement when you reached 22 percent equity in the property financed with a home loan.

These days, you can't have your mortgage insurance payments canceled after reaching a certain percentage of equity in your home. Also, the number of times lenders will charge you MIP will depend on your down payment amount.

In this case, a 10 percent down payment will attract a MIP term of 11 years, while a down payment of less than 10 percent of the loan amount will attract MIP paid over the life of the loan.

Down Payment Assistance Programs Offered by the Florida Housing Finance Corporation

The Florida Housing Finance Corporation (FL Housing) has consistently advocated for affordable homeownership opportunities across the Sunshine State.

One way FL Housing supports homebuyers who cannot raise a down payment is by offering down payment assistance programs that provide up to $10,000 in funding.

Down payment and closing cost assistance loans from FL Housing come in the form of second mortgage loans you can use to cover your down payment and closing costs.

You may apply to get enrolled in the following down payment assistance programs when looking to buy a home in Holmes County, Florida:

The Florida Assist (FL Assist)

FL Assist is a down payment assistance program from the Florida Housing Finance Corporation that offers a maximum of $10,000 on government-backed home loans such as USDA, VA, and FHA and conventional loans.

The assistance comes in the form of a 0 percent deferred second mortgage that is non-amortizing. Though the second mortgage is not forgivable, you can have your repayments deferred.

FL HLP (The Florida Homeownership Loan Program) Second Mortgage

As a down payment assistance program from FL Housing, the Florida Homeownership Loan Program offers a 3 percent fully-amortizing loan of up to $10,000 on a term of 15 years.

The second mortgage attracts monthly payments with the flexibility of deferring the remaining unpaid loan amount balance.

Since an FL HLP loan requires monthly payments, your lender will consider the payments in your debt-to-income income ratio when qualifying you for the loan.

3, 4, and 5 Percent HFA Preferred and HFA Advantage PLUS Second Mortgage

With this down payment and closing cost assistance program from FL Housing, you receive 3, 4, or 5 percent of the loan as a forgivable second mortgage.

You can also have the second mortgage forgiven at a rate of 20 percent per year in five years when used with conventional HFA Advantage for TBA or HFA Preferred for TBA first mortgage products.

FHA Handbook on the table

The Downsides of Hiding Cash for Your Next Home Purchase Under the Mattress

Hiding a stack of cash under the mattress or any other hidden location in your home won't improve your chances of qualifying for a home loan. This is because the "mattress money" may be suspected to have come from illegal activities.

Even in the middle of a meltdown in the housing market, resist the urge to stash lots of cash under the mattress. Instead, keep the money in a savings account or use it to purchase stock.

No lender will allow you to use cash when closing on the home of your dreams. Failing to verify the source of the cash can make it difficult for the home sale and loan process to fall through.

Real estate agents as well are on high alert regarding money laundering cases. This means that bringing loads of cash when closing on a house can trigger a Suspicious Activity Report to be filled with the Financial Crimes Enforcement Network under the US Treasury Department.

Ways of Depositing the Mattress Money

The wise thing to do when you have a large stack of cash lying around your house is to deposit it in a bank. Once the cash is deposited in a savings account, it will form part of your assets, which lenders can use to verify your financial stability for a home loan.

Leave the cash in the account for a minimum of 60 days to have two bank statements you can use in your loan application. You should also do the same to Cash gifts received from your loved ones and ensure that they are appropriately documented to prevent them from being labeled as loans.

Slipping a large amount of cash to the account in small amounts will be considered as making a layered deposit. You may consider this approach if you have large stacks of cash. It can help prevent the IRS from flagging your account provided the deposits are under $10,000.

It's still possible to have your "mattress money" issues worked out if you inform your lender about them early enough in the loan application process. But for your down payment, closing costs, and credit verification, you'll need to make the deposits at least 60 days before you begin the home buying process or sign the sale contract.

Loan Limits for Holmes County, Florida

FHA loan limits dictate the maximum loan amount the Federal Housing Administration can insure in a given county. In this case, your mortgage must satisfy the FHA loan limits to improve your chances of getting approved.

The Department of Housing and Urban Development began increasing the limits on FHA loans in 2022 across 3,188 counties, leaving 45 counties with an unchanged loan limit. To be precise, the maximum amount you can take as an FHA loan for a single-family home in a low-cost county is $420,680 and $970,800 if the home is situated in a high-cost county.

The FHA loan program's four pricing tiers used on loan limits include a particular exception tier, standard tier, high-cost tier, and mid-range tier. Since most counties in the US are within the mid-range group, their FHA loan limits fall between high and low. The baseline FHA loan limit for most single-family properties in 2022 is $420,680, which is a $65,000 increase compared to $356,360 in 2021.

The FHA keeps increasing the lending limits to reflect the inflation of home prices in Florida based on the cost of local houses and housing types. Expect a loan limit of $420,680 on a single-family home, $538,650 on a triplex, $651,050 for a duplex and $809,150 for a four-plex.

Top Exciting Activities for Kids in Holmes County, Florida

Holmes County is known for its deep-rooted history and scenic attractions in the northwestern part of Florida. There are plenty of recreational opportunities for families and children in the county.

You may consider the following children-friendly activities during your stay in Holmes County, Florida:

Picnicking at the Ponce De Leon Springs State Park

One of the children-friendly attractions in Holmes County, FL, has to be Ponce De Leon Springs State Park, a nature-filled park with a relaxing feel. Whether you want to enjoy something extraordinary at the park or visit with your kids on an off-season weekday, you'll always find something fun to do.

Besides the crystal-clear spring pouring about 14 million gallons of water daily, the 443-acre park features picnic pavilions, changing rooms, and nature trails to make your visit worthwhile.

As your children play at the picnic pavilion, you can rest on one of the picnic tables, staring at the surrounding scenery, or read a book. Ponce De Leon Springs State Park also has plenty of photograph-friendly spots that you can capture with a camera lens.

Spend Quality Time at Manatee Public Beach

At the Manatee Public Beach lies beautiful blue clear waters and white sandy beaches, among other attractions that make visiting Anna Maria Island with your kids worthwhile.

You and your family can use plenty of picnic tables, grills, bike racks, and grills to make your time at the beach more memorable. And if you start running out of things to do, you can explore the surrounding playgrounds and volleyball courts for a fun, sporty time.

Take a tour of Beautiful Holmes Creek

The picturesque Holmes Creek is a great place for your kids to be surrounded by beautiful coastal sceneries. A tour along this creek will also be a good idea if you and your family are looking for an escape from the busy city life.

At Holmes Creek, your children see Cypress Springs, a freshwater spring known for its picturesque sights. You can sign up for custom-planned trips through the 25-mile creek for your kids to enjoy a guided tour of the place. Some of the fun activities to engage in at the creek include rope swings, fishing, and swimming.

Rent a Canoe at the Old Cypress Canoe Rentals

Old Cypress Canoe Rentals offers a wide range of kayak and canoe trips down the Choctawhatchee River and Holmes Creek for a specified amount of time.

The tours are administered by trained kayak and canoe operators and allow your kids to discover what Holmes Creek and the Choctawhatchee River have to offer. And if your kids enjoy primitive camping, you can sign them up for overnight rides.

Hiking at the Falling Waters State Park

As home to Falling Waters Sink (a 72-feet waterfall - the highest in Florida), Falling Waters State Park features plenty of recreational opportunities for kids. During a visit to the state park, you will witness a small creek tumbling down into a deep sinkhole before disappearing into a strategically placed underground cave.

Since the creek tends to dry up quickly due to its tiny size, it's best to visit the place after it has rained heavily. You can also explore the 2-acre lake, campground, and short hiking trails at the state park for more fun times.

The Bottom Line

FHA loans were designed to make it easier for homebuyers with lower credit scores and fewer down payment savings to afford homes.

They can be convenient for your case if you want a loan with lower down payment options. Start your application for an FHA loan to enjoy the perks that come with the 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.

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