Skip to content
Fact Checked by Experts

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

The American dream is never complete without considering homeownership. However, the millennial generation is experiencing difficulty achieving this goal. High student loans and rising rent costs have introduced new barriers to homeownership. First-time buyers can leverage loan options that draw them closer to this dream.

The Federal Housing Administration (FHA) provides mortgage solutions with no stringent requirements. Do you need a loan to help you purchase a home while offering looser financial requirements? Florida FHA loans will suit you perfectly. You can qualify for these loans with a low credit score or existing debt.

The loan is ideal for low-to-moderate income families keen on achieving the goal of homeownership. First-time homebuyers prefer this loan for their quest to find a home.

This FHA guide will walk you through the ins and outs of FHA home loans. You'll learn about the loan's requirements and discover if it's your best fit.

Understanding FHA Loans

The US government set up the Federal Housing Administration (FHA) in 1934 after the Great Repression. This program seeks to help low-income borrowers to purchase a home.

The Federal Housing Administration backs FHA loans. Essentially, this agency protects a lender against complete loss if a borrower defaults on the loan.

Although you need to pay mortgage insurance for these loans, they are available with lower credit score limits. Also, borrowers can leverage low-down payment options of as low as 3.5% with these loans.

First-time home buyers prefer this loan option because of the more lenient requirements. However, more experienced home buyers can still leverage FHA loans. The top benefits of the loans include:

  • Lower credit score requirements compared to typical housing loans

  • Lower down payment requirements

  • The possibility of rolling your closing costs into an existing loan

  • Qualification is open to people recovering from bankruptcy or financial constraints

How can you make the most of these and more benefits? Take a look at the loan's requirements.

FHA Loan Requirements

Like any other mortgage loan, borrowers must meet specific requirements to qualify. Before qualification, you need to ensure that:

  • An FHA-approved appraiser appraises the home

  • You will use the home as your primary residence

  • An inspection indicates that your property meets minimum property standards

  • You occupy the house within 60 days of the closing

Besides the basic requirements, lenders will also consider your credit score, income requirements, loan limits, and mortgage insurance.

FHA Loan Down Payments

Your home's down payment is the upfront amount you put down once you close the deal. For these loans, minimum down payment amounts often depend on a borrower's credit score. If your credit score is more than 580, then the loan will require a 3.5% down payment.

Borrowers with a credit score of 500 - 579 need a 10% minimum down payment. The Florida Housing department offers down payment assistance programs to ease the burden on borrowers. You can qualify for $10k down payment assistance with these programs.

FHA Mortgage Insurance

FHA home loans require borrowers to pay a mortgage insurance premium. With this insurance, your FHA lender won't suffer significant loss if you default on the loan. Typically, the insurance will last throughout the loan's lifetime.

With FHA mortgage insurance, you'll pay 1.75% of your primary loan as the upfront mortgage amount. Besides, you'll also need to pay annual mortgage insurance, depending on your loan's length.

Credit Score Requirements

The loans come with the benefit of low credit score requirements for borrowers. You can qualify for a loan with a low down payment amount with a high credit score. However, your credit score still determines how much loan you can borrow.

For example, borrowers with a credit score above 580 qualify for a down payment of 3.5%. However, if your credit score is lower, prepare to pay a down payment of close to 10%. All the same, these down payment amounts are lower than the amounts on typical mortgages.

Improving your credit score before applying for a loan is always prudent. You qualify for lower down payments and interest rates with a higher credit score.

Typically, your credit score depends on multiple factors, including:

  • The amount of credit you use
  • How promptly do you pay your bills
  • The type of credit you owe
  • The new and recent credit you have

Borrowers with a higher credit score also have a high debt-to-income ratio (DTI). This ratio indicates the gross income you use to pay your debts. To find your DTI ratio, divide your total monthly debt payments by your gross income. For example, if your gross income is $10,000 per month and your debts amount to $2000, your DTI is 20%.

Lenders often prefer borrowers with a lower DTI. In these instances, you'll need a higher credit score to qualify for the loan. However, you can still get approval for an FHA loan with a higher DTI.

Income Requirements

FHA loan eligibility doesn't usually depend on any income amount. However, most lenders require you to provide proof of consistent employment history. Sharing your pay stubs, bank statements, and federal tax returns should be sufficient. Some lenders might also request W-2s and other verification examples.

FHA Loan Limits in Lake County, Florida

Applying and getting approval for the loan is typically the same across multiple states. However, the limits available for borrowers will be different for different states.

FHA loan limits usually vary based on the location of the potential home. These limits also vary depending on whether the house is in a high-cost or low-cost area. For high-cost areas, you can enjoy loan limits of up to $970,800, while lower-cost sites can have loan limits as low as $420,680.

Remember that most first-time buyers might not borrow up to the total limit. Typically, your limit will depend on the earlier mentioned factors. If you have a non-consistent income, talk to a local mortgage expert to help determine how much you can borrow.

FHA Loan Rates

Compared to conventional loans, FHA loans offer competitive interest rates. With government backing, lenders have lower risks and tend to offer lower rates. Interest rates vary depending on your down payment amount and prevailing interest rates. Besides, your DTI ratio and credit score will also determine the rates.

Diverse FHA Home Loan Options

The FHA backs diverse home loan options to help potential borrowers get their preferred home. It is always good practice to consider that your FHA loan option limits the home you'll buy. Also, your choice determines how much you can spend once you receive the loan amount,

Therefore, it is always helpful to understand your loan type. Top home loan options include:

Purchase Loans

For FHA purchase loans, your lender can approve you with a 3.5% down payment and a credit score of 580. However, you'll also need a low DTI to qualify for this loan. You can only be eligible with a higher DTI if you have a higher credit score.

FHA Term Refinances

FHA term rates are ideal for anyone keen on leveraging lower rates on their mortgage. In most instances, these borrowers might have credit that has taken a hit. FHA rate refinances also have less stringent credit requirements.

Do you need to change your loan terms or lower your rate? FHA term will serve you suitably. However, remember that you might pay mortgage insurance throughout the loan's life. This condition hinges on the amount of equity you'll have in the rate refinance.

FHA Streamline

With an existing FHA loan, you can have term refinances with multiple benefits, thanks to the FHA streamline. First, this loan option lets you refinance at lower rates regardless of how much you owe on the home.

Besides, FHA Streamlines also require less documentation. Given your existing FHA loan, your lender won't require comprehensive employment verification. Also, you will have reduced appraisal requirements and less documentation to verify your income and assets.

While you might enjoy multiple benefits, most lenders will require you to have completed no less than six payments before signing up for a streamline. Besides, borrowers not current on their loans may not be eligible for this loan.

Cash-Out Refinance

FHA loans can also allow you to have a cash-out refinance. Before signing up for the cash-out refinance, the FHA requires you to have no less than 15% equity in your home. In this case, you need to provide complete documentation. Most lenders will request income and asset documentation along with employment verification.

FHA 203(k) Loan

This loan option is ideal for anyone who buys a home that requires renovations. However, FHA 203(k) loans might not be entirely affordable for borrowers who only want to make renovations. Essentially, you can't borrow any amount less than $5,000.

Borrowers can choose between the standard and limited FHA 203(k) loan options. With standard loans, you'll get more freedom to complete renovations in the home. On the other hand, limited loans won't require complete paperwork to get approval.

For the FHA 203(k) loans, lenders require you to complete the renovations within six months to maintain the loan terms. You can qualify for this loan if your renovation falls under these conditions.

  • Replacing beat-down floors

  • Modernizing your plumbing and roofing

  • Introducing accessibility improvements to cater to disabled people

  • Adding modern home systems like automatic garage door openers or air conditioners

  • Making repairs and changes to the home's foundation

FHA loan written on the model of home

FHA Home Loans Costs

Before applying for an FHA loan, it is always helpful to consider the cost implications. While it is easier to qualify for this loan, you'll still need to remit closing costs, mortgage insurance, and additional fees. Here's more information regarding this loan's associated costs.

Insurance Payments

The mortgage insurance premiums come in two forms. First, you'll need to pay a one-time cost of 1.75% of your loan while closing. Typically, lenders will require you to pay mortgage insurance if your down payment is less than 20%. Also, insurance premiums involve annual payments that vary with the length of your mortgage.

If you find these payments expensive, you could opt for an FHA refinance loan that helps you adjust terms and rates.

Closing Costs

FHA closing costs tend to be similar to other typical mortgage closing costs. The upfront insurance payment is one of such costs. Most borrowers prefer to roll this payment into the total loan amount.

Besides, you'll also need to pay application fees and administrative costs. In most instances, these costs can add up to 3 - 6% of the home's price. It is always helpful to assess various lenders' costs to find a suitable FHA loan deal.

While considering the cost implications of the loan, don't fall into the temptation of having all your cash at hand. Some borrowers store their deposit amounts under the mattress. An ideal option would be to find a suitable bank and open an account with them.

You can deposit your amount and let it stay untouched for at least two months. Once you are sure about the FHA loan's requirements, you can proceed to scout for a home suitable for your needs.

FHA Loan Application Process

The loan application process requires you to find an FHA-approved lender. Most borrowers settle for a direct lender like a bank or private mortgage broker. If you opt for a mortgage broker, you might have a wider pool of options.

Once you settle on your preferred lender, work on getting pre-approved for the FHA loan. Mortgage pre-approval is essential in revealing to the home seller that you intend to follow through with the purchase.

You'll then proceed to complete the loan application. Most lenders will request exhaustive documentation that includes your social security number and tax returns. Besides, you might need to provide appraisal documentation, proof of mortgage/rent payments, and employment verification.

Benefits of an FHA Loan

First-time home buyers find these loans appealing for multiple reasons. Signing up for this loan allows you to leverage numerous benefits, including:

  • Lower Interest Rates - Compared with conventional loans, FHA loans often offer lower interest rates.

  • Smaller Down Payments - These loans require down payments as low as 3.5% compared to conventional loan down payments, which usually start at 20%.

  • Flexible Credit Requirements - Lenders provide more flexible credit requirements because of the government backing they receive on these loans.

Activities for kids in Lake County, Florida

Once you secure your dream home in Lake County, how can you spend time with your kids in the area?

  • Visit Lake Louisa State Park - Enjoy a great time in this park as you explore the dynamic trails in the area. Be sure to spare some picnic time between Lake Louisa and Bear Lake.

  • Explore the Wooton Park - This park offers a safe children's playground and a station where you can unwind. You'll also find a unique opportunity to see diverse bird life as you make your way through the walking trails.

  • Visit Venetian Gardens Park - Do you have a pet? Find time to explore this pristine garden. The beautiful surroundings offer the perfect spot for picnics, walking your dogs, or playing volleyball with your young ones. Venetian Gardens Park is the place to be if you prefer taking in scenic views.

  • Lake Minneola Visit - Take an adventurous excursion with your kids as you go around this expansive Lake. Hire bikes from the rental shops and create beautiful memories with the kids.

Family Activities in Lake County, Florida.

  • Citrus Showcase Adventure - Hop onto a monster school bus and enjoy a great event as you ride through delightful groves. Also, spare some time to explore the Old Time Country Store and find something to carry back home after an eventful day. You can pick some fresh citrus fruits if you visit during the seasons.

  • Explore Lake Dora - Enjoy a refreshing cat boat tour and take in the eye-catching wildlife and cypress trees bordering Lake Dora. Catch the scenic views of the Lake's sunset. You could also opt to visit Mt Dora during the day before heading to the Lake to watch the diverse wildlife.

  • Visit Alexander Springs - Cool down at these refreshing water bodies. The swimming area will give you the satisfaction you crave from the springs.

  • Eat at Troy's Cuban Deli - Do you want to enjoy some delicious Hispanic cuisines? Stop by at Troy's Cuban Deli. The friendly staff offers tasty Latin meals all day long.

Should you Settle for a Florida FHA loan?

Many millennial homebuyers risk regretting their home purchase. Often, they do not consider all the costs that arise from homeownership. Learning more about homeownership loans is always helpful to avoid falling into this trap.

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.

Find The Right Mortgage

For more than 20 years, Phil have been helping customers achieve their home purchase and refinance goals by providing them with invaluable resources and support.

Schedule a FREE Consultation
Phil Ganz

Subscribe to Get Your First Time Homebuyer Checklist

Sign up for the weekly newsletter to stay up to date on the latest real estate market trends, loan news, and so much more!