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

Are you short on cash but need to settle down with your family? Have you considered getting an FHA home loan? FHA loans are government-backed mortgages that help borrowers buy homes with loose financial requirements. FHA loans are available for borrowers with a low credit score or existing debts. Besides, borrowers with financial issues can apply and get loan approval.

While many people associate FHA home loans with first-time buyers, the loans are also suitable for families, qualified permanent residents, and repeat home buyers. You can use this loan to buy your home or refinance an existing mortgage.'

Unlike most mortgages, FHA home loans require lower down payments and minimum credit scores. These less-stringent requirements encourage most first-time buyers to opt for FHA loans. FHA home loans also have flexible underwriting standards that give borrowers with low incomes a chance to own homes.

This guide will walk you through the ins and outs of FHA loans, ensuring that you know what you need to qualify for the loan.

A deep dive into FHA Loans

The Federal Housing Administration backs FHA loans, ensuring that lenders get sufficient security while providing enticing loan options.

The Department of Housing and Urban Development designed these loans to help borrowers who might not quickly get loans from private lenders.

The government created these loans in 1934 to cushion citizens from the harsh financial conditions arising from the Great Depression.

Home buyers with shaky financial histories have since used FHA loans to buy homes through the years. Because of the government-backing offered, lenders show less hesitation in offering this loan.

Many lenders have set this loan's minimum credit score requirements at 580. Besides, borrowers must pay 3.5% of the home's purchase price as a downpayment. For the closing costs, expect to pay 3% - 6% of the purchase price.

Borrowers can choose between the 15-year and 30-year term loans. FHA home loans also come with fixed and variable interest rates. Third party-mortgage lenders underwrite and administer these government-backed loans. It is always good practice to assess your financial position before settling for a suitable choice.

FHA Home Loan Requirements

You need to meet specific requirements to qualify for an FHA home loan. First, the FHA insists that an FHA-approved appraiser should appraise the home you consider. Upon appraisal of the house, an inspection must also take place to determine whether or not the home meets the minimum property standards.

You can't use FHA home loans to buy an investment property or a second home. Also, the FHA loans are only available for borrowers who use them to purchase their primary residents. Upon closing, the FHA expects you to occupy the house within 60 days.

Multiple factors will determine whether or not you get approved. These factors include:

Down Payment Requirements

As stated earlier, most lenders require you to pay a minimum down payment of 3.5%. Often, this down payment amount goes hand in hand with your credit score. For example, the 3.5% down payment amount applies to borrowers with a credit score of 580 and higher.

If you have a lower credit score, expect to pay a higher down payment. Most lenders will require a down payment of 10% if you have a credit score of 500 - 579.

With the down payment assistance programs, you shouldn't experience any difficulty paying up the required down payment amounts. Once you have your down payment amount, don't fall into the temptation of storing the money under your mattress.

Instead, open a bank account, deposit the amount, and let it remain for 60 days. With this approach, you won't have trouble putting down the required amount.

Credit Score Requirements

A higher credit score often guarantees an easier time getting approvals for different mortgage loans. However, FHA loans allow borrowers with lower credit scores to get approvals for the loan.

Although the FHA has guidelines for credit score minimums, different lenders might require specific minimum scores. It is always helpful to shop around among other lenders to find one that best suits your needs.

Income Requirements

Usually, your income amount may not influence your FHA home loan eligibility. However, your lender will require proof of consistent employment. Sharing bank statements and pay stubs should be sufficient to verify your income. Specific lenders can also ask for your federal tax returns or W-2s.

Homeownership Requirements

FHA loans are not only suitable for first-time home buyers. Anyone with a small down payment or low credit score can qualify for the FHA home loans. These loans offer more relaxed qualification requirements that make them suitable for people with credit challenges.

Debunking FHA Mortgage Insurance

While FHA loans have less stringent qualification requirements, borrowers must pay the FHA mortgage insurance. In this case, the lender doesn't suffer complete loss when a borrower defaults. If you pay a down payment of less than 20 percent, expect to pay mortgage insurance for the loan.

You will need to pay the mortgage insurance as an upfront premium and as an annual mortgage insurance premium. Borrowers usually pay the upfront premium upon receiving the loan. Besides, you could choose to roll this premium into your loan amount.

Typically, you'll pay a regular monthly payment to cover your yearly mortgage premium. On the other hand, the annual premium depends on your loan term and amount. If you remain current with your monthly mortgage payments, your lender will cancel the premiums after 11 years.

Alternatively, you can opt to refinance your mortgage into a non-FHA loan.

FHA Home Loan Limits for Levy County

The home's location typically influences the maximum limit you can borrow on an FHA home loan. For high-cost areas, the Department of Housing and Urban Development has set a maximum limit of $970,800. On the other hand, borrowers buying a home in low-cost regions can get as low as $420,680.

Leverage Down payment Assistance Programs

Florida Housing offers diverse down payment programs that can ease the pressure from eligible borrowers. These programs include:

FL Assist

The FL Assist program offers funds to help you clear your down payment and part of the closing costs. You automatically qualify for the assist mortgage if you qualify for the FL FHA home loan. This program allows borrowers to get up to $10,000 on their FHA loans.

However, remember that the FL Assist is non-forgivable. The FA might defer this loan, but you'll need to pay the total amount if you sell or transfer the home. Also, you cannot combine the FL Assist program with other down payment programs.

FL Home Loan Program

Florida Housing offers a second mortgage program of up to $10,000 for your down payments. This program is available with a 15-year loan term. Like the FL Assist program, borrowers cannot use this program alongside other down payment programs.

FHA Home Loan Options

FHA offers multiple loan options to meet the diverse needs of homebuyers. Here's more information regarding the various FHA loan types:

FHA Purchase Loans

This mortgage loan is ideal for financing a primary residence. With a credit score of 580, you can get financing with a down payment amount as low as 3.5%. However, most lenders require you to have an equally low debt-to-income (DTI) ratio if you have a low score.

Borrowers with higher scores can qualify for the loan with a higher DTI.

FHA Rate/Term Refinances

The FHA rate/term refinance is handy for borrowers with an existing mortgage. If you have a score of 580, you can use this loan to change your term or lower your rate. With less stringent credit requirements, term refinances will bail you out if your credit has taken a hit.

FHA Streamline

Do you need unique benefits when refinancing your existing FHA loans? These loan options offer a speedy way of reducing their monthly mortgage payment. Your outstanding loan balance determines the FHA Streamline amount.

Because of your existing FHA home loan, you will have reduced appraisal requirements. Many borrowers prefer FHA Streamline loans because of the reduced documentation requirements. Also, most lenders won't require comprehensive employment verification.

While you require minimal documentation, most lenders will require you to provide:

  • Current mortgage statements
  • Current FHA mortgage notes
  • Contact information to verify employment
  • Your final settlement statement

With the FHA Streamline loan, you can refinance your loan at a lower rate if you owe more on the home than its actual value. You only need good standing with your existing FHA home loan.

FHA 203(k) Loan

Does your new home require renovation and repair? The FHA 203(k) loan is ideal when you need to upgrade the home you've bought. Besides, you can also use this loan as a refinance to remodel or repair the house.

Typical projects that might require the FHA 203(k) loan include:

  • Electrical repairs
  • Plumbing works
  • Landscaping
  • Energy-efficient upgrades
  • Room additions
  • Flooring

Once you settle on this FHA home loan, you could choose between the Full and Streamlined loan options. The full loan option is ideal for projects that require more than $35,000. You can use this amount for structural repairs, room additions, and comprehensive repairs.

The streamlined loan option is ideal if your home doesn't need foundation and structural repairs. Most borrowers use the loan for nonstructural improvements that cost less than $35,000.

Cash-Out Refinance

As you pay your FHA home loan consistently, you gain equity in your home. Before converting your property into money, you'll need at least 15% equity in the home. With a cash-out refinance, you can take advantage of this equity and get cash in exchange.

A significant advantage of the cash-out refinance is that you won't have additional monthly payments on your bills. When you refinance your loan, you can make repairs on your property. You could also use the money to eliminate outstanding student loans or cover unexpected medical bills.

With a cash-out refinance, you also access lower interest rates than credit cards.

Energy Efficient Mortgage

Does your new home require energy-efficient upgrades during a home purchase? Sign up for an Energy-Efficient Mortgage to complete upgrades for new or existing homes.

Real estate agent and client discussing home purchases

FHA Loan Benefits

First-time home buyers prefer FHA home loans due to their multiple benefits. Some of these benefits include:

Low Down Payments

The FHA home loan is ideal if you need a mortgage program with low down payments. Borrowers can get financing with down payments as low as 3.5%.

Reduced Closing Costs

For conventional loans, sellers can only pay up to 3% of the closing costs. However, FHA loans let sellers pay up to 6% of the loan amount.

Credit Requirements

FHA home loans do not require borrowers to have perfect credit for approval. A credit score of 580 is sufficient to qualify for a loan with a 3.5% down payment amount.

Lower Interest Rates

FHA home buyers are also eligible for lower interest rates without having high credit scores. For example, with a credit score of 680, you qualify for the same interest rates as a conventional borrower whose credit score is 740.

Flexible Debt-To-Income Ratios

Most mortgages require borrowers to have excellent debt-to-income (DTI) ratios. A good DTI assures the FHA that borrowers can pay their debt obligations consistently while paying their monthly bills.

FHA loans, on their part, have less strict DTI requirements for clients.

Which Homes Qualify for an FHA Loan?

Usually, the FHA requires you to finance your principal residence with the FHA home loan. Essentially, you can't use this program for rental properties or investments.

Upon approval, the FHA home loan can help you purchase a townhouse, condominium, detached house, or rowhouse. The property could be a single-family, multifamily, or manufactured home. However, you will need an FHA-approved appraiser to guarantee that the home meets specific minimum standards.

Also, you can't use the FHA home loan to purchase a home within 90 days of a previous sale.

FHA Home Loan Application Process

Mortgage lenders and banks offer FHA loans to eligible borrowers. Typically, lenders perform background checks on your financial status to determine whether or not you qualify for the loan.

Once you settle on your preferred lender, you'll need to apply for pre-approval. Pre-approval will reveal the total amount you can borrow.

Most lenders will also require you to provide personal and financial documents, including:

  • Your social security number
  • Proof of citizenship
  • Recent bank statements

FHA Loans Vs. Conventional Loans

Unlike conventional loans, which have no government guarantee, FHA home loans are government-backed mortgage options that are easier to qualify. Also, these loans have lower credit score requirements and monthly insurance payments.

However, an FHA home loan might have closing costs that are not common with many conventional loans.

Activities for kids in Levy County, Florida

Are you wondering how you'll keep your kids entertained once you settle in Levy County? Here are some top activities you can consider for your kids.

  • Visit Lois Forte Park - From lovely gazebos to picnic tables and shade, Lois Forte Park offers lots of fun activities for your kids.

  • Nature's Discovery - Enjoy a wholesome experience with nature whenever you stop by Nature's Discovery. Interact with the manatees while exploring the deep waters.

  • Explore the Bounce N Play Indoor Family Fun Center - Take a trip to this family fun center that guarantees non-stop fun for your family. The gigantic bounce house is the perfect spot for younger children and toddlers to blast off energy. On the other hand, your teens and young adults can treat themselves to various arcade games.

  • Florida Greenway Trailhead & Playground - This clean playground has natural ground and a cushioned cover that guarantees consistent fun for your young ones. You could also enjoy evening walks with your children through the wild brush and fields.

Family activities in Levy County, Florida

Levy County, Florida, has numerous other attraction sites suitable for the whole family. Consider visiting any of these areas.

  • The Great Florida Birding Trail - Enjoy a popular year-round pastime whenever you explore this birding trail. Take in the beautiful views of shorebirds and birds of prey. Spare some time to enjoy a half-mile walk through the Indian Shell Mound.

  • Cedar Key - Explore this fishing community as you marvel at the more straightforward way of life. This island town gives you a chance to unplug from the hectic city life.

  • Dine at Los Avina Mexican Restaurant - Do you want to try out some tasty Hispanic cuisines? If you are in a hurry, you could take out your preferred authentic Mexican dish. Stop by at the Los Avina Mexican Restaurant for sumptuous meals all day long.

Get an FHA Loan for your Homebuying Project

Buying a home is a lifetime investment for many Levy County, Florida residents. FHA home loans are ideal for borrowers who have less-than-stellar credit scores. If you have less cash for a down payment, the FHA loans will also serve you suitably.

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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