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

Are you looking to spend less on your home's down payment? Has your credit score had hits along the way? FHA home loans might be a suitable answer to your problems. FHA loans are government-insured home mortgages that borrowers can get from banks or FHA-approved lenders. These loans usually require a lower minimum down payments compared to conventional loans.

At the core of FHA home loans is a desire to enable low-income individuals to buy their preferred homes.

FHA's guarantee on these loans makes it easier for borrowers to get loan approval from their lenders. The lenient qualification requirements make these loans more popular among first-time buyers.

However, you don't need to be a first-time buyer to apply for the FHA loans. Read on to learn more about the ins and outs of this home mortgage option.

FHA Home Loans Debunked

In the 1930s, the housing industry witnessed mass foreclosures and defaults. The government introduced the Federal Housing Administration (FHA) to combat this situation. This move resulted in FHA loans that offered lenders enough insurance and injected life into the housing market.

FHA loans offered a lifeline to people with bad credit. Besides, anyone who had difficulty raising a down payment for their mortgage could own a house. With time, the housing market witnessed a rise in the number of homeowners.

First-time home buyers often prefer FHA home loans as you can get a loan for a down payment as low as 3.5%. You only need a minimum credit of 580 to get approved. However, you need to pay mortgage insurance premiums which ensure that lenders don't suffer losses if you default.

Typically, FHA home loan terms depend on your chosen loan program. For example, the loan's interest rates might fluctuate depending on market conditions. Presently, expect to pay 4% interest on a 30-year fixed FHA home loan.

On the other hand, the maximum amount you can receive varies by property type and the market. This limit ranges from $420,680 to $1.2 million. The loan duration varies by program but can't go beyond 30 years.

Different FHA Loan Types

Multiple FHA home loan options are available for borrowers in different circumstances. These diverse options offer refinancing options, improved loans, and adjustable rates. The most popular FHA home loan programs include:

FHA 203(k) Loans

The FHA 203(k) improvement loan helps borrowers repair and renovate their homes. Borrowers can get up to $35,000 to upgrade their homes. With this option, you won't need an additional loan for renovations.

The top home upgrades you can complete with a 203(k) loan include:

  • Major landscaping work
  • Energy conservation enhancements
  • Accessibility improvements
  • Making structural repairs to your home's foundation
  • Replacing dangerous flooring

Remember that you can't complete luxury additions like swimming pools with this loan option. First-time homebuyers who've settled on a property that requires work will find this option very helpful.

Cash-out Refinances

An FHA cash-out refinance ideal for anyone who's cash strapped but has sufficient equity in their home. Typically, as your home increases in value, you gain more equity. Lenders will require you to provide complete documentation before approving this loan.

With a cash-out refinance, you can get cash for the equity you've built over time. You can use the money upon refinancing to cover unexpected bills or catch up on your student loan payments.

FHA Energy Efficient Mortgage

Do you need to make upgrades that will lower your utility bills? Consider getting the FHA energy-efficient mortgage. With this loan, you won't need an additional mortgage to cover improvement costs on your home.

The Energy Efficient Mortgage lets you improve your homes without spending more than you intend. Ensure that you work with a qualified energy consultant to determine the costs associated with adding energy-efficient features.

Use this amount to complete various improvements, including:

  • Installing weatherization treatments
  • Completing water heater installations
  • Installing home insulation
  • Installing energy-efficient appliances, windows, and panes.

Streamline Refinancing

Do you want streamlined underwriting for your FHA home loan? This loan option ensures that you get better terms on your mortgage. With this loan, your lender won't need to verify your income or employment. Also, an appraisal is unnecessary, and you don't need a specific minimum credit score to qualify.

Streamline refinancing is beneficial for homeowners whose income or credit score has dropped. The loan option refinances your loan, helping you better your financial position.

Section 245(a) loan

If you expect your income to increase, consider going for the section 245(a) loan. While your monthly payments will be low when you start making payments, expect them to keep increasing over time. With this loan, you can buy your home and repay the mortgage sooner.

Home Equity Conversion Mortgage

Seniors with significant home equity can leverage the benefits that HECM offers. This reverse mortgage loan enables borrowers to get cash from their home's equity. However, only people 62 years or older qualify for this loan.

Besides, lenders might require you to guarantee that your financial capability allows you to repay your loan.

FHA Loan Requirements

Typically, it would be best to have a credit score of at least 580 to qualify for FHA loans with a 3.5% down payment. However, you can still qualify for the loan with a credit score of less than 580. In this case, you'll need to pay a minimum down payment of 10%. Besides the credit score and down payment, you need to meet other requirements. They include:

Property Requirements

FHA loans are only available for people buying their primary residence. You won't get approval if you intend to use your loan for real estate investment. Also, you may get disqualified if your loan goes towards buying a vacation property.

You might also need to perform a property appraisal to ascertain that your house meets minimum property standards. FHA financing is available for different properties, including townhouses, condominiums, and row houses.

Steady Employment History

Your lender needs the assurance that you won't fail to meet your loan obligations upon approval. Evidence of recent steady employment assures your lender that you can make good your commitment.

Your tax returns and bank statements will be valuable at this point. Besides, your lender might ask for a valid social security number.

FHA Loan Limits in Leon County, Florida

Depending on your loan type and home size, you can get between $5,000 and $809,150 from your FHA lender. However, your lender will need your assurance that the home will be your primary residence before approving the loan. Remember that you can't use FHA loans for real estate investments.

FHA home loan limits usually depend on the number of living units on a property. The limits also vary with the market value as borrowers living in high-end markets can be eligible for higher loan amounts. You can qualify for an FHA loan if you purchase one to four living-unit properties.

In Leon County, Florida, borrowers can qualify for up to $809,150 for four living units and $420,680 if they choose one living-unit home.

It is also helpful to ascertain that your home qualifies for the FHA home loan. Working with an FHA-approved appraiser will reveal the home's value and help you make an informed decision while making a loan request. Remember that the loan amount can't exceed your home's value.

Understanding FHA Mortgage Insurance Premiums

FHA loans require borrowers to pay mortgage insurance premiums that insure lenders. Once you get approval for your loan, be prepared to pay an upfront MIP and an annual MIP that you'll pay monthly. Typically, the upfront MIP equals 1.75% of the loan amount. Depending on your preference, you can use the upfront amount during closing or roll it into your loan.

On the other hand, the annual MIP payments range from 0.45% to 1.05% of your loan. Despite its name, you'll need to make these payments monthly. This amount usually varies with your loan's amount and duration.

If you default, the FHA will use your premiums to complete the mortgage repayment. Depending on your loan's length, you'll need to pay these premiums throughout the loan's life or for 11 years. However, once you get at least 20% equity in the home, you won't need to keep paying mortgage insurance.

FHA Loan Application

Before starting the FHA loan application process, it is always helpful to identify a home you'd want to buy. In this case, you can have a guided approach.

You'll need to apply with the bank or your preferred lender. Be sure to shop around for available lenders to find one who'll suit your needs. Also, remember to check the lender's reputation. The goal is to ensure that you enjoy a seamless mortgage process.

Once you settle on a lender, ask for a pre-approval to determine your financial position and likelihood of getting the loan. Pre-approval will also help you know how much you can borrow.

From there, you'll proceed to your lender's underwriting process. Most lenders will request you to show proof of income. Others might need to run credit checks and confirm that you can raise the required down payment amount.

During underwriting, be prepared to provide the following documentation:

  • Your credit report
  • Pay stubs and bank statements to verify your income
  • An FHA-approved appraisal
  • Employment history for two years

FHA Home Loan text on the piece of paper

Leverage Down Payment Assistance Programs

If you still have trouble raising the 3.5% or 10% down payment, don't hesitate to make the most of Florida Housing's down payment assistance programs.

These programs offer up to $10,000, which you can use to pay your down payment and the loan's closing costs. Eligible buyers have access to:

The Florida Assist (FL Assist)

Get up to $10,000 on your FHA home loan, and clear your down payment. However, remember that this amount is non-forgivable. The amount becomes payable if you:

  • Complete a sale
  • Transfer the property
  • Refinance your home
  • Cease occupying the property

The Florida Homeownership Loan Program

This second mortgage also offers $10,000 to eligible homebuyers. However, the program comes with a monthly payment throughout your 15-year loan term. When underwriting, your lender might consider this program while assessing your debt-to-income ratio.

Once you get this amount, don't store it under your mattress as some buyers would. Instead, find a suitable bank and open an account with them. Proceed with your home search as your money remains in the bank. With this approach, you'll have an easier time completing your sale.

Should you Consider FHA home loans?

Are you wondering if FHA loans will suit your situation? While these loan options work best for low-to-moderate income citizens, anyone else can use them. If you can't save enough for down payments required for conventional mortgages, don't think twice about applying for FHA loans.

FHA loans can also come in handy in other situations, including:

  • For anyone rebuilding their credit

  • For cash-strapped seniors looking to get cash from the equity in their homes

  • Homebuyers who might not afford a large down payment

Advantages of FHA Home Loans

Many first-time homebuyers prefer FHA loans for their multiple benefits. Typical benefits you can leverage include:

Low Down Payments

Many would-be buyers fail to achieve their homeownership goal due to high down payment requirements. FHA loans are the most suitable option if you need a mortgage option with low down payment requirements. You only need a 3.5% down payment to qualify for financing.

Low Minimum Credit Scores

FHA home loans let you access loans with a credit score of as low as 500 with a 10% down payment. The less stringent credit score requirements ensure that borrowers with damaged credit can get financing for a home.

Also, applicants who've successfully re-established their credit can access these loans. Most lenders don't require you to have perfect credit to approve your loan request.

Lower Interest Rates

Unlike conventional loans, your FHA interest loans won't depend on your down payment amount or credit score. Regardless of your credit score, you'll pay the same interest rates on your FHA loans. Besides, these loans help you save more on mortgage interest than conventional loans.

Closing Costs

Sellers can pay up to 6% of the loan amount to ease the pressure on buyers. For conventional loans, sellers can't pay more than 3% of the loan.

Underwriting Flexibility

Compared to other mortgage programs, FHA home loans are more forgiving of credit mishaps. Essentially, lenders can distinguish between borrowers who often misuse credit and those whose lapses are beyond their control. Besides, you can get loan approval with higher debt-to-income ratios.

Less Waiting Time After Foreclosure or Bankruptcy

Have you signed for bankruptcy before? Then the FHA home loan will only require you to be two years out of bankruptcy to get loan approval.

You will only qualify for other mortgages after four years. Borrowers who've experienced foreclosures before will get loan approval after three years.

Friendlier debt ratios

FHA home loans make qualifying easier if you have a lot of existing debt. Typically, conventional loans will limit your debt-to-income ratio to 36%. However, you can qualify for an FHA home loan with a DTI of 43%.

Activities for Children in Leon County, Florida

  • Visit the Museum of Florida History - The fantastic displays will take you through the different periods of Florida. The knowledgeable staff offers deeper explanations whenever you ask. Be sure to get a souvenir at the museum gift shop.

  • Explore St. Marks Lighthouse - Relax in the beach area and stick around for the beautiful sunset perfect for your pictures. On the other hand, the Monarchs' butterflies guarantee a gorgeous site.

  • Saint Marks Trail - Break a sweat on a bike when you visit Saint Marks Trail. Rest on the occasional benches. The paved trail guarantees an enjoyable for you and your young ones.

Family Activities in Leon County, Florida

  • Visit the Lake Jackson Mounds State Park - Spare time to take in the beautiful sites in the public plaza and earthwork mounds. Check out the grist mill and plantation from the 1800s.

  • Visit Tom Brown Park - Enjoy countless activities whenever you visit this expansive park. The running and hiking trails, open grass, and lighted night sports fields won't disappoint. Rest on the picnic tables as your kids run and play on the open grass fields.

  • Dine at Maria Maria Homemade Mexican Cuisine & Bakery - Enjoy homemade Hispanic Cuisines in a family-friendly environment. Try out the homemade conchas and family recipes served passionately.

Consider FHA Home Loans to Attain Home Ownership

Are you experiencing difficulty getting mortgages from the bank? Do you have less-than-perfect credit or have little cash for a down payment? FHA loans can support your quest and make it easier for you to get financing for your new home.

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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