(Mar 27, 2023)
However, buying a house can be challenging, especially in our current economy, but obstacles are meant to be overcome, and there are several ways you can fulfill your dream. For starters, you can use government programs like VA home loans (for veterans) and USDA loans (for those looking to purchase homes in rural areas.
You can also apply for and get financial assistance to purchase your home through FHA loans. These loans are designed for individuals with low credit scores and have easy financial requirements. This article focuses on FHA loans and how the program helps individuals with economic challenges purchase homes.
FHA loans are government-backed mortgage loans with less stringent financial requirements for qualifying applicants. The loans help individuals with debt, low credit scores, bankruptcy, a history of bad financial records, and other financial issues to purchase a home. Let's learn more about the loan, its financial requirements, and whether it's right for you.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Indian River County, Florida.
What are FHA loans?
FHA loan is a government-backed loan program provided by the Federal Housing Administration. The FHA is a sub-agency controlled by the Department of Housing and Urban Development. As such, the FHA insures FHA loans and protects lenders if borrowers default on their loans.
If you qualify, you can get an FHA loan with a low minimum credit score limit and low down payments. However, your lender will require you to pay for the mortgage's insurance. Low down payments and lenient credit score requirements make the loans attractive to first-time home buyers; however, they aren't limited to this group of individuals.
FHA loan benefits
You can gain several benefits from getting an FHA loan, some of which we've discussed above. They include:
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A chance to place lower down payments than you would for conventional loans.
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Lower credit score requirements compared to more conventional loans.
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A chance to roll the closing costs into the loan.
- Improved chances of qualifying for the loan, especially for bankrupt individuals and those with a poor financial history.
FHA loan requirements
Applicants seeking to qualify for an FHA loan must meet specific standards before accepting applications. They include:
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Getting their desired home appraised by an appraised approved by the FHA.
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Ensuring their home is used as a primary residence and not as a second home or an investment property.
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Ensuring they occupy the home within 60 days after closing.
- Inspecting the home and ensuring it meets required minimum property standards.
There are other specific conditions applicants should meet, including the required credit score, paying for mortgage insurance, providing a down payment, meeting loan limits, and providing proof of sufficient income. Most of these qualifications are similar to those for DACA recipients.
FHA loan down payments
A down payment is a percentage of the total cost of the property you plan on purchasing paid upfront, i.e., the amount of cash your lender requires you to put down. The minimum downpayment you can put on your home depends on your credit score, which is between 300 and 850, used to determine your creditworthiness.
FHA loans require applicants to make a 3.5% downpayment if their credit score ranges between 500 and 579. However, some lenders require qualifying applicants with 580 as their minimum credit score. You should also note that you can make a cash down payment through gift assistance; however, you should document the money properly before making your payment.
For instance, depositing the cash in a bank account would be good. Let it sit for 60 days before providing it as a down payment. Doing this helps create a stable paper trail allowing relevant bodies to understand that the cash doesn't have any strings, i.e., it isn't a loan in disguise.
FHA mortgage insurance
Qualifying applicants are required to pay an MIP (Mortgage Insurance Premium) for their FHA loans. The payments insure your lender if you default on your FHA loan. You may have to pay for mortgage insurance for as long as the loan is on (in most cases).
Lenders assess the insurance in various ways. For instance, you'll get to pay a mortgage premium that's usually 1.75% of the total amount of your base loan upfront. However, you may also pay the MIP for at least 11 years if you pay a 10% downpayment.
Additionally, borrowers must pay a mortgage insurance premium annually based on how long their mortgage runs, down payment, total mortgage, and LTV (loan-to-value) ratio. Annual MIP (Mortgage Insurance Premium) payments range from 0.45% to 1.05% of your base loan's total amount.
FHA interest rates
FHA interest rates are more competitive than those provided by conventional house loans because the government backs lenders.
Government backing decreases most risks they'd face allowing them to offer borrowers lower rates; however, this depends on several factors, including your income, credit score, prevailing interest rates, DTI ratio, downpayment, etc.
FHA income requirements
Getting an FHA loan isn't necessarily dictated by how much income you get; however, it is a factor. You can verify your income by providing bank statements, W-2s, sharing pay stubs, and tax returns.
Your lender may also ask for other forms of proof as they see fit. For instance, you should prove that you have a steady income and a good employment history.
FHA loan limits
There is a maximum limit to how much you can borrow to purchase a home. The amount you can borrow often depends on the county you wish to reside in. The Department of Housing and Urban Development states that lending for high-cost areas in metropolitan locations can reach $970800, while lending for low-cost areas can reach $420680.
FHA loan limits are placed based on how many living units are present on the property. FHA loans can be provided for 1 to 4 living unit properties if the owner lives in one of the units. FHA loan limits for individuals looking to purchase homes in Indian County range between $420680 (1 living unit home) and $809150 (4 living units).
How your credit score affects FHA loans
There are lots of factors used to determine your credit score. They include:
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How much credit do you use (Credit worthiness)
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Type of credit used (credit cards, loans, etc.)
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Amount of cash owed on credit cards
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Whether your bills are paid on time
- Amount of new and recent credit taken
Individuals with a higher credit score can qualify for FHA loans if they have a high DTI or debt-to-income ratio. The debt-to-income ratio refers to how much of your gross income you use to pay off your debts.
Your debt-to-income ratio is determined by dividing your total monthly debts by your gross monthly income (i.e., the money you earn each month before paying any taxes).
The figure obtained from this calculation is represented as a percentage. You can calculate your DTI by dividing your debts by your gross monthly income. For instance, you should add all your debts, including your car and student loans (which may add up to $2000), and divide this total by your monthly income (Example: $8000). Your DTI will be 25%.
However, you can still qualify for a loan with a good credit score. A low DTU is better compared to a high DTI since it means you earn more money you could use to pay off your loan. The FHA states that your monthly mortgage payments should be less than 31% of your monthly earnings.
Additionally, they state that your DTI should be less than 43% of what you earn each month in cases where your loan is manually underwritten. Rember, you can qualify for an FHA loan if you have a high credit score regardless of how high your DTI is.
Types of FHA home loans
You can choose from many different types of FHA home loans, and each type you choose has limitations on how you spend the funding and which home you can buy. Thus, you need to ensure you acquire the right loan. FHA loan types include:
Purchase
You can still qualify for an FHA loan if you have a high FICO score and DTI, but you should ensure your DTI doesn't exceed 57%.
Individuals with 580 as their median FICO score can get an FHA loan with a 3.5% down payment. However, it'd still be good to know that your DTI should be low if your FICO score is that low.
FHA term/rate refinances
You can go for an FHA loan if you are in a situation where you are in another mortgage, and your credit's taken a hit, but you want the terms or rates revised.
You can refinance your mortgage if you have a FICO score of 580 and a low DTI. You can add more debt to the transaction if you have a FICO score of 620 or higher.
FHA streamline
FHA streamline helps applicants with existing FHA loans refinance their terms or rates with added benefits. For starters, you can refinance your home and get a lower rate even when you owe more than your home is worth. The FHA does this to help you and increase your chances of paying off your mortgage.
FHA streamline has a low MIP that's 0.55% of the total loan and an upfront MIP of 0.01%. Additionally, the loan has minimal documentation in these areas:
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Documentation for assets and income
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Documentation for employment verification
- Minimal appraisal requirements
Cash-out refinance
You can get cash-out refinance using an FHA loan; however, various lenders have varying credit score requirements for approval. The FHA requires borrowers to convert their property value into cash and leave about 15% equity in the home.
Your lender will require you to provide complete documentation, including employment verification plus asset and income sharing.
FHA 203 (K) loan
This loan allows you to purchase a home and renovate it simultaneously; however, it isn't usually the most affordable option. The minimum loan balance you can borrow is $5000, and any repairs you make should end within six months. A few projects you are allowed to complete using this loan are:
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Replacing dangerous or old flooring
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Modernizing the home with necessary systems like automated garage door openers and central air
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Replacing or adding gutter sections, roofing, and plumbing
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Improving the home's accessibility for disabled individuals that live on the property
- Making structural changes and repairs to the property's foundation
FHA 203(K) loans come in two forms standard and limited. Limited 203(K) loans can be approved with less paperwork, but standard loans provide more freedom when repairing your property.
Florida Housing Assistance Program
Eligible borrowers can get funds to pay for MIPs (Mortgage Insurance Premium), a principal reduction on the first premium, closing costs and prepaid, and down payment. Like the FHA, borrowers that qualify for the FL First Mortgage Loan Program automatically qualify for $10K through Florida's housing assistance program.
You'll have to be aware of a few facts about the program. The $10K assistance isn't a stand-alone loan and isn't forgivable. Instead, its payment is deferred except in cases involving a sale, refinancing the property, satisfaction of the initial mortgage, or if the mortgager ceases occupation of the home.
Additionally, you can not combine it with other down payment assistance programs in Florida.
Things to do in Indian River County, Florida
There are plenty of fun activities that the whole family can enjoy in Indian River County. Here are some options to consider:
Surf's Up
You've come to the right place if you're searching for somewhere you can catch the waves and enjoy some surfing. Sebastian Inlet State Park is the best destination you could visit with your family. This location is great because it isn't as crowded as other locations like Miami South Beach and Cocoa Beach.
Monster Hole is a spot that stands out because of an artificial sandbar that creates 10ft waves. It has a 3-mile shoreline and uncrowded access to crashing waves. You could also visit other great locations like Wabasso Beach Park and Cero Beach Pier, which offer great waves during high tide.
The Path of the Paddle
Want to enjoy Indian River County's kayaking experiences as a family? If this is your thing are looking to try a new adventure and create some fond memories, then you should rent a kayak and try out Cypress lake. The location is filled with beautiful Cypress trees whose knees jut out of the water with roots covered in majestic Spanish moss.
Experience the 21-mile shoreline and observe countless ospreys and their nests. Get to see several other birds, including the roseate spoonbill and some alligators. You could also paddle on the Jungle Trail, through mangrove flats, and out into the open water. You can explore various islands here, including Roosevelt, Pelican Island, and Egret.
Art
Indian River County is renowned globally for its love of art. The location's tropical atmosphere inspires creativity, leading to various fantastic art pieces. Vero Beach's historic art district has multiple galleries, including Gallery 14 and The Laughing Dog Gallery. But that's not all.
You can also explore your creative side at the Cork, Canvas, and Company event hosted by the Vero Beach Museum of Arts. Visit the location each Thursday and get a guided tour by artists to help you create your masterpiece. You could also get tickets and catch a play at the Riverside Theatre.
North County Aquatic Center
Visit this aquatic center with your children, and you won't regret it. The family-oriented pool is heated, open year-round, and features a competition pool, activity pool, changing facilities, and diving. It's all any child would ever want.
Their activity pool is perfect for children of all ages and has water cannons, slides, a water tree, bubblers, and a large water play structure. The aquatic center's competition pool is filled with nearly a million gallons of water and has 24 lanes at 25 yards used for lap swimming.
La Taberna
La Taberna has some of the best Hispanic cuisines in Indian River County. The meals are tasty and made from fresh, authentic ingredients. The restaurant is one of the best and attributes most of its success to the owners - a dedicated family and collection of amazing chefs with more than 18 years of experience creating mouth-watering meals.
Conclusion
Indian River County, Florida is an excellent place for people looking to settle down and start a family. The county offers serenity and amazing landscapes far removed from the hustle experienced in most cities.
Applying for and qualifying for an FHA loan for a smoother home purchase experience is only the icing on the cake. So, what's holding you back?
(Mar 27, 2023)
