The United States government seeks to try and help people, especially those who would otherwise struggle to purchase a home, access the financing they need to achieve their homeownership ambitions. The federal government does this through institutions such as the Federal Housing Administration (FHA).
In this piece, we'll take a closer look at how the FHA operates and how we can take advantage of their loan programs.
We will also highlight the Florida Assist Second Mortgage Loan program and see how the residents of Jefferson County, Florida, are being assisted by it. Let's jump right in.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Jefferson County, Florida.
The Federal Housing Administration Mortgage Loan Program
Most of us are familiar with general loans and mortgage loans. Still, there's an important distinction between conventional mortgage loans and the type of loans offered by the FHA. The significant distinction between these loan types is that FHA loans require small down payments from borrowers.
With as little as 3.5% of the property value as a down payment, you can be on your way to home ownership, thanks to the FHA Housing Loan program.
Aside from this, the FHA program offers very lenient and affordable repayment schedules, allowing borrowers such as people with poor credit, low incomes, minorities, and first-time property buyers to keep up with the required payments.
The FHA program provides various loan programs, including Guaranteed Payment Loans (245a), Home Purchase Loans (203b), Reverse Mortgages, Standard Refinance Loans, Cash-Out Refinancing, and Energy Efficiency Mortgages.
All these loan products are insured by the federal government, meaning lenders will be reimbursed using taxpayer dollars if a borrower fails to honor their payments. This security is what allows lenders to offer borrowers such attractive terms.
Eligibility Requirements for FHA Loans
While the FHA has a mission to provide affordable financing for as many people as possible, the reality of the housing industry means that they need to have certain measures in place to ensure the viability and continued existence of the program.
The FHA has minimum requirements in place that are designed to encourage loan repayment. These include:
DTI (Debt-to-Income) Ratios
Debt-to-Income ratios are figures banks and financial institutions use to represent a person's ability to pay back the money they borrow comfortably.
The ratio calculates a person's total debt by their annual income. A person making $10,000 but paying $2,000 each to service their debt will be said to have a DTI of 20% (2,000/10,000).
According to the FHA guidelines, people with DTIs over 40% are not eligible for their loan program. The reason is that increasing such a borrower's debt burden might render them unable to keep up with their repayments, eventually leading to default.
Note that debt includes student debt, mortgage debt, credit card debt, motor vehicle debt, and so on. Utilities and incidentals such as internet costs, gym memberships, and utilities are not included in DTI calculations.
Even with this requirement in place, lenders are authorized to offer loans to people if there are mitigating circumstances to be considered.
Exceptions can be made for people with large cash reserves, excellent credit, or other factors that put them in a position to comfortably keep up with their payments, regardless of their DTI status.
The FHA guidelines state that borrowers need a minimum FICO credit score of 640 to qualify for a loan. Credit scores effectively indicate a person's financial responsibility and track record when honoring debt obligations.
While the FHA set their figure at 640, the reality is that lenders have the discretion to approve loans to people with even lower scores, although few lenders will be willing to lend out money to people below this credit line.
The final decision lies with the institution involved, so there's always the possibility of successfully applying for an FHA loan.
Part of the requirements that the FHA insists on is that appraisals are conducted on the property before the money is released. Appraisals are not to be confused with home inspections, which check for a property's sanitary status, safety, and livability. The purpose of these inspections is to determine the value and condition of the house.
The appraisal process is also familiar with conventional loans, but the difference is that the FHA provides its own set of dedicated property appraisal experts.
While appraisals are mandatory before issuing any loans, reserve mortgages, or standard refinancing loans, they are not required for streamlined refinancing operations.
Minimum Down Payments
The most significant advantage that FHA loans offer borrowers is the low down payment requirements that come with their loans. A borrower can qualify for a mortgage loan with as little as 3.5% of the property's value.
Still, borrowers are free to pay more than 3.5% as a down payment. Doing so has significant advantages, as most lenders will offer you more favorable mortgage repayment rates and lower Mortgage Insurance costs.
MIP (Mortgage Insurance Payments) are charges that come with mortgages where the borrower's down payment falls short of 10% of the property's value. This means that the higher your down payment, the lower your MIP will be.
Although MIP usually runs for the lifetime of a loan, borrowers can retire the loan by opting to refinance the loan. Putting down 5% on a 30-year loan or 10% on a 15-year mortgage loan will typically bring you significantly reduced premium payments.
However, this can only be done once the payments have accumulated more than 20% of the property value.
The Florida Assist Down Payment Loan Program
In partnership with the FHA, the Florida Housing Finance Corporation also tries to provide additional assistance to people hoping to purchase property in the state.
The Florida Assist Second Mortgage program is set up to support FHA mortgage loan borrowers by helping them pay off their down payments, mortgage insurance, principal mortgage reductions, and closing costs.
The Florida Assist Program operates as follows:
The Florida Assist program offers non-amortizing, zero percent deferred loans.
All borrowers who have been approved for FHA mortgage loans in Florida (backed by Fannie Mae, USDA, FHA, or HFA) will automatically be eligible for the Florida Assist Program.
- Applicants that qualify for the program may receive up to a maximum of $10,000 if they have received USDA-RD Loans or FHA loans, but people who have taken conventional loans will be eligible to receive up to $7,500.
The loans provided by the Florida Assist program are not forgivable, although they are deferred. The loan will become payable immediately if a borrower sells the property, pays off their primary loan, or vacates the purchased home.
Eligibility Requirements for the Florida Assist Program
The Florida Assist Program, despite its objective of helping Floridians become homeowners, still places certain restrictions and eligibility requirements on its borrowers.
To qualify for this loan program, borrowers should not have owned a housing property for the past three years. This is to ensure that only the neediest receive assistance from the program and prevent unscrupulous people from taking advantage of the program.
There are, however, exceptions to this rule, including:
Federally Designated Area Exemption - This exemption is designed to cover areas of Florida that the government considers underdeveloped. These areas are typically the state's most remote, rural, and out-of-the-way areas. The exemption's purpose is to help stimulate property purchases, thus stimulating the area's economy.
- Veteran's Exemption - This targets veterans who have previously served in the nation's air force, military, or naval service. Even if they have owned homes recently, they will be allowed to apply to the Florida Assist Program, although they will be required to produce confirmation that they were honorably discharged from their service.
The idea behind the Florida Assist program is to help middle and lower-income Floridians afford the purchase of a home. To this end, the program excludes people the government considers financially capable of achieving this goal without additional help. The program limits how many eligible borrowers can make in a year.
This upper-income limit varies from county to county, with the Jefferson County upper limit at $91,560 for properties in targeted areas and $76,300 in non-targeted areas with 1 or 2 people living in the home. In households with more than three incomes, the upper limit in non-targeted areas is $87,745.
Purchase Price Limits
There are limits placed on the values of property a person can purchase if they wish to apply for the Florida Assist loan program. Again, this feature is set up to help ensure that the program assists those who need it the most.
The purchase price limit for properties in non-targeted areas of Jefferson County is $311,980, while the acquisition cap in targeted areas currently stands at $381,308.
Managing Your Money
Whenever you plan on taking out a loan, you should always have a plan for how you will store it and put it to good use. One common mistake to be avoided at all costs is the temptation of keeping cash in your home.
Whether you have a good safe to keep your valuables in or stuff your money underneath a mattress, it's never a good idea to keep large sums of money with you.
There's always the possibility of theft or loss when hefty amounts of cash are involved. When the funds for a down payment are involved, the safest action will be to keep your money in the bank until you are ready to hand it over to the property seller.
Ideally, you won't need to handle physical cash at all - checks or wire transfers make for safe, secure, and trackable transactions, making things safer for everyone involved.
Fun Family Activities in Jefferson County, Florida
Jefferson County is one of Florida's most beautiful counties and has plenty to offer people looking for a place to settle and raise families. The county enjoys a superb climate throughout the year, allowing us to enjoy its unspoiled natural beauty all year round.
Whatever you and your loved ones enjoy participating in, you can be sure to find it here. Let's look at some of everyone's favorite things to do in Jefferson County.
Experience Letchworth-Love Mounds Archaeological State Park
This state park is the proud host of Florida's tallest ceremonial Native American mound, built by them approximately 1,100 and 1,800 years ago. Aside from the park's historical value, there are plenty of attractions to keep everyone busy and entertained.
An expansive pavilion picnic area offers bronze sculptures, interpretive displays, and a wheelchair-accessible viewing area.
The pavilion can be hired out for weddings, gatherings, and reunions upon request. Should you wish for a more comprehensive look at the grounds and the surrounding trails, guided tours are available.
Visit the Aucilla River
The Aucilla River system is one of the most pristine parts of Jefferson County. It's an excellent place for families to come and participate in paddling, kayaking, swimming, and other water sports.
The government designated the river and its surrounding lands as a National Recreation Trail and managed by the Aucilla Wildlife Management District.
If you don't want to get into the water, then the extensive hiking trails running along the river and trailing up to the surrounding wildlife areas where photographers and younger visitors will have the time of their lives.
Indulge at the Tupelo Bakery
The Tupelo Bakery is a great place to indulge your sweet tooth if you're looking for a homely, authentic taste of Florida. Inspired by the County's Hispanic roots, the eatery features mouthwatering pies, muffins, pastries, sandwiches, soups, and so on.
Tupelo bakery sources its beef, pork, and chicken locally and makes everything from scratch. You won't have to take the owner's word for it - the bakery proudly displays the names of all the local suppliers that provide them with their ingredients.
If you're looking for a place to get a feel for local flavor and figure out the mood among the county's large Hispanic population, there's no better place to start than at Tupelo Bakery.
Experience the John Denham House Bed and Breakfast
This grand Victorian-era mansion, with period antiques, a dome, eight fireplaces, and at least one ghostly inhabitant, is a famous landmark in Jefferson County.
The famous ghost of Aunt Sarah said to haunt one of the rooms in the mansion is not known to be aggressive but might make for an exciting night in the elegant building.
Starting from the B&B, you can take a guided tour of the most haunted places in the town, visiting historical sites such as the Old Jail Museum, Opera House, Indian Mounds, and other points of interest.
If the spirit world is not your cup of tea, don't worry, the ghost tour is mostly tongue-in-cheek so that you can bring along the little ones should you want to - it's all in good fun.
Enjoy the Monticello Opera
Founded back in 1890 by a local businessman (John H. Perkins), the Monticello Opera House has grown to become one of the central fixtures of Jefferson County's cultural life.
The historic, handsome building was recently voted Best of Tallahassee Entertainment Venues and is considered one of the state's oldest venues for the performing arts.
There are plenty of shows held here all year round, with resident theater groups, visiting performers, summer camps, and learning programs contributing to make it a genuinely communal cultural hub.
The desire to own homes of our own is one of the most natural and persistent ones in the human heart, but it's becoming increasingly difficult for Americans to achieve it without help.
By providing affordable, accessible access to mortgage loans and financing, the Federal Housing Administration and other state and federal institutions are helping make homeownership a reality for thousands of people each year.
To enjoy low mortgage payment rates, 3.5% down payments, and convenient, manageable repayment schedules, you should consider applying for an FHA mortgage loan and the Florida Assist Second Mortgage program.
These programs have allowed countless families to own homes in the past few decades, and they can do the same for you. Best of luck!