The county is not only a paradise for tourists but also a place where inhabitants can enjoy life against a backdrop of sunny, clear skies. However, for most people wishing to settle here, the greatest obstacle is the price of homes.
With the median prices of homes skyrocketing and the cost of living rising across the board, most Americans cannot qualify for conventional home loans due to credit issues, bankruptcy, foreclosure, huge monthly debts, etc.
Fortunately, the FHA loan program is available nationwide for folks denied conventional home loans. This is a look at the loan program, including qualification requirements and loan limits for the folks of Liberty County, Florida.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Liberty County, Florida.
About the FHA Loan Program
FHA Loans are one of the country's most recognized home loan programs. These loans enable borrowers with low incomes and poor credit histories to purchase homes with as little as a 3.5 percent down payment.
The loans are meant for individuals who are denied traditional home loans due to their high debt loads, bad credit records, previous bankruptcies, or foreclosures. Consider FHA loans if you live in Liberty County, Florida, and cannot obtain a conventional mortgage.
How do the Loans Work?
FHA loans are mortgages covered by the FHA, an agency managed by the Department of Housing and Urban Development. The government launched these loans to help people with difficulty saving substantial down payments, poor to ordinary credit scores, and histories of bankruptcy and foreclosure.
Before the 1934 creation of the FHA, lenders would deny these people loans. But because FHA loans are insured, part of the risk is reduced, and so are the qualification requirements.
If your application for an FHA loan is approved, the lender will finance roughly 96.5% of the appraised value of the house you wish to buy. That means you will need to put down 3.5 percent.
You need to show documentation of your income, job history, credit history, and ability to pay for the down payment and closing costs before your loan application can be approved.
However, you can take great advantage of FHA loans' flexible qualification requirements if:
Your credit score is in the 500 – 619 range.
Your overall DTI exceeds the usual DTI ratio ceiling of 50%.
You need a loan amount equal to or below the county's current FHA lending cap.
You would like to deposit 3.5% towards a two-to-four-unit multi-family home and will use the rental income to qualify.
You would like to put 3.5 percent down on a fixer-upper and include the cost of renovations in the loan amount.
You have a cosigner who will not be residing in the home to help you qualify for the loan.
You declared bankruptcy two or more years ago.
You have had a foreclosure in the past 3+ years.
- You are not eligible for a traditional loan.
Types of FHA Loans
FHA loans come in a variety of formats. Your ability to buy a particular size and style of home will depend on the FHA loan option you select. Ensuring that you receive the appropriate financing is crucial. Consider applying for another government loan if you don't qualify for an FHA loan.
Here are some examples of the loans that the FHA guarantees.
Home Equity Conversion Mortgage - The HECM is a reverse mortgage allowing homeowners over 62 to convert their home equity into cash while maintaining property ownership.
Home Improvement Loan 203(k) - Additional funds for upgrades and repairs are included in this FHA loan.
The FHA Energy Efficient Mortgage - Additional funds for energy-efficient upgrades are included in this FHA loan.
Section 245(a) Loan - The introductory mortgage repayments on this FHA loan will gradually increase as your income increases, decreasing the loan's term.
FHA Streamline - This is a more straightforward refinancing alternative for individuals who already have FHA loans. It makes it easier for FHA loan holders to refinance to lower-interest loans by reducing the need for appraisals, employment verifications, and asset and income documentation.
FHA Cash-Out-Refinance - Using this refinancing option, you can convert the value of your house into cash. Most lenders require a 620 FICO score and thorough documentation, including a declaration of assets and income, as well as employment verification, to approve this refinancing.
- FHA Purchase Loans - First-time home buyers can apply for FHA purchase loans, also known as 203(b). These are mortgages used to fund the purchase of a principal home. You can borrow 96.5% of your home's appraised value and pay the other 3.5%.
Going forward, when we mention FHA loans in this post, you can presume we mean FHA 203b loans.
FHA Loan Benefits
Down payment as little as 3.5%
Minimum credit score of 580
50% max DTI ratio. But borrowers with FICO scores above 620 can qualify with an even higher DTI ratio.
Non-traditional credit histories are okay.
There are no geographical or income restrictions.
- You might qualify even with a history of bankruptcy and foreclosures.
However, because FHA applicants carry higher credit risk, higher interest rates and mortgage insurance premiums might be necessary. Additionally, there is a maximum amount you can borrow, which varies based on where you live and the type of house you wish to buy.
FHA Mortgage Insurance Premium
Most FHA loan agreements, except those involving tribal communities or Hawaiian homelands members, demand upfront and ongoing mortgage insurance premiums.
The upfront MIP is 1.75 percent of the original loan amount, levied at closure and added to your mortgage debt.
Meanwhile, depending on your loan duration and down payment, the annual MIP ranges from 0.45% to 1% of the original loan amount. The expense is divided by 12 and added to your mortgage repayments.
You will have to pay the annual MIP throughout your loan or over the first 11 years if you provide at least a 10% down payment.
Property agreements on tribal grounds or Hawaiian homelands are excluded from the mortgage insurance premium requirement, as specified in the FHA loan manual.
MIP vs. PMI
Private mortgage insurance, or PMI, is the insurance required on conventional loans. FHA loans, on the other hand, demand MIP.
Unlike MIP, PMI is based on the borrower's credit rating. As a result, an FHA loan may result in lower monthly payments than a regular loan.
You can cease paying PMI once you achieve 20 percent equity in your home. Unfortunately, MIPs are required throughout the life of the loan unless you make a more significant down payment.
Your APR may place you in the more expensive FHA mortgage loan category since you pay two distinct types of mortgage insurance.
FHA Loan Down Payment and Credit Score Requirements
The following are the two most essential aspects of FHA loans:
- Credit score requirement - 580
- Minimum required down payment - 3.5%
According to FHA criteria, borrowers can be approved with FICOs as low as 500. However, you'll need to make a 10% down payment if your FICO score is in the 500–579 range. Plus, not every lender will accept such low credit scores. When you request a pre-approval for an FHA loan, the lender will retrieve your credit score and may charge you about $30 for this process.
What If I Don't Have a Credit Score?
Do not fret. Borrowers who apply for FHA loans are not required to have a standard credit score. Most likely, a lender will ask you to provide a history of on-time rent, utility, and other monthly expense payments. It will be even more crucial to demonstrate that you have a consistent source of income if you lack credit history.
The FHA allows individuals to use gift cards to finance the down payment if they cannot save for it. Gift cards can originate from a variety of places, such as:
- Blood and marriage relations
- Down payment aid programs (DPAs)
You cannot utilize cash on hand, aka mattress money, as a down payment since lenders will want to know the source of the money.
Whether the money came from a gift or your savings, be sure there is a paper trail. Keep records of deposits and transfers. If you have a gift card, you'll need a gift letter from the issuer saying it's a gift and not a loan, which is also required.
People who live in federally declared disaster regions are exempt from the down payment requirement.
Does the FHA Have a Down Payment Assistance Program?
No, the FHA itself doesn't have a DPA program. But one is available through the Florida Housing First Mortgage Program. This home financing scheme is for front-line workers (nurses, teachers, doctors, active service duty members, veterans, law enforcement officers, firefighters, veterinarians, etc.).
The home loan is offered as a 30-year, fixed-rate primary mortgage. If a borrower qualifies for this mortgage, they may receive down payment assistance of up to $10,000 in the form of a zero-rate, non-amortizing deferred second mortgage.
If you qualify for the second mortgage, you can use it to:
- Put a deposit on a house
- Pay mortgage insurance
- Settle closing costs and other prepaid expenses
- Reduce the principal on the first mortgage
The loan for this second mortgage is not forgiven. If you move out and rent the property, sell the property, transfer the deed, refinance, etc., you'll be asked to pay off all the remaining balance.
FHA Loan Income Limits
FHA loans don't have income limits. However, this does not imply that income is not essential. Lenders will still need proof that you can afford the monthly mortgage payments before approving you for the loan.
The good news is that most income forms are considered when evaluating loans. These include:
- W2 wages
- Earnings from a gig or freelance work
- Income from investment
- Income from Social Security
- Additional Security Income
- Social Security Disability Insurance
Before moving to underwrite your loan, the lender could request that you provide pay stubs, W2-wage forms, tax returns, and other forms of income documentation.
FHA Employment Requirements
An application for an FHA loan must include your social security number, 2 years of work history, and proof of legal age.
To verify your income, the lender may request a record of your latest pay stub if you've worked for the same employer for longer than two years.
If self-employed, you will be asked to produce business and personal tax returns for the last 24 months. Additionally, updated balance sheets, profit and loss statements, and other financial information might be required.
If you've been freelancing for less than a year and don't have a two-year tax record, you must use your previous work and income history instead. However, you'll need to be freelancing in the same field as your previous employment or in a close-related field.
If you recently graduated and have only recently begun your career, you can use your degree program as a stand-in for employment history. If you have stable employment and a sufficient income, you may qualify for the loan while still paying student debts.
FHA Home Requirements
FHA loans can purchase townhomes, condos, prefabricated homes, and single-family or multi-family properties.
Nevertheless, the following assessment, inspection, and occupancy requirements apply:
An FHA-authorized appraiser must appraise the home you're considering buying.
The house cannot be used as a rental or second residence.
The house needs to be checked to see if it satisfies the basic home requirements, such as having access to clean water for drinking, safe access for vehicles and pedestrians, adequate living space, heat, water and waste disposal, structural integrity, etc.
- The house must be occupied within 60 days following purchase.
FHA Loan Closing Costs
The amount of money you will require during closing dramatically depends on where you purchase. Generally, expect to pay 2–5% of your loan in closing costs—perhaps more for small loan amounts. In 2020, the average closing costs totaled $3,470 (minus taxes) and $6,087.
Estimates of closing costs are as follows:
Loan origination fee - 0 to 1% of the loan amount
Loan application fee - usually $300
Home appraisal fee - usually $500
Home inspection fee - usually $300
Pest inspection cost - usually $100
Homeowners' insurance fees - between $300 and $1,000
Title examination and insurance fees - usually $900
Credit score request fee - typically, $30
Attorney's fee - Between $500 and $1,000
- Survey fee - Between $150-400
Your lender will inform you of the closing costs before you sign the deal. Take time to review everything, seek verification, and try to negotiate some expenses.
Who is Eligible for an FHA Loan?
FHA borrowers don't have to be US citizens; both non-residents and resident aliens can apply. Eligibility requirements are as follows.
You must have a social security number.
You must be eligible to work in the country.
You must have a 12-month history of on-time debt payments, including mortgage and rent payments.
- You must meet all other program loan requirements.
It's important to remember that eligibility doesn't imply qualification. Even if you are eligible, you'll still be required to meet your lender's approval criteria.
FHA Loan Limits
The max loan size the FHA is willing to insure varies by location and type of house. Here's a look at the figures in Liberty County, Florida:
- One unit - $420, 680
- Two units - $538, 650
- Three units - $651, 050
- Four units - $808, 150
These limits apply to home purchases in the non-metro areas only.
FHA Loan Application Process
To apply for the FHA loan, you'll need to shop around, compare rates and other costs, and select the best deal.
Next, fill out the loan application form and allow the lender to pull your credit score. Finally, provide all the required income, work, and credit history statements.
Is Liberty County, Florida Great for Families?
Yes, Liberty County is ideal for families. It combines new and old South elements, warm heritage, and meticulous progress.
Bound by two rivers and regarded as a country unto itself by the locals, this county has maintained its best qualities while prudently managing extraordinary expansion and putting forward-thinking infrastructure, technologies, and educational facilities in preparation for the 21st century.
This county is an outdoor enthusiast's dream, with more trees than people. The county has the atmosphere of a close-knit community where families can lead unique lifestyles and businesses can prosper.
Some of the top activities and attractions to enjoy with your family include:
Apalachicola National Forest
This forest is the biggest national forest in the state because it covers more than half the county. Its size is nearly equal to that of Everglades National Park.
There are numerous ways to appreciate this forest, including driving through it on Scenic Route 65, which offers the chance to see black bears and red-headed woodpeckers.
A scenic trail meanders past forest lakes and streams off the paved road, allowing you to explore deeper into the forest on foot.
The forest borders the Apalachicola River, which forms the county's western boundary and provides plenty of opportunities for river sports.
Apalachicola Bluffs and Ravines Preserve
The Apalachicola Bluffs and Ravines Preserve maintains some of the world's rarest environments and provides a glimpse of threatened and endangered animals and plants, some of which you'll never see anywhere else.
Panhandle Pioneer Settlement
There are over 18 historical structures at the Panhandle Pioneer Settlement, a natural history museum in Blountstown, Florida. The structures were relocated from various places in the county and are now set up on 5 acres to resemble a picture-perfect farming community.
The Settlement hosts several festivals and events throughout the year and provides instruction in historical skills and crafts.
This restaurant provides the region's most affordable, authentically traditional Mexican food. The salsa is fantastic, the proprietors are excellent, and the price is fair! It's worth the trip!
Is it wise to get an FHA loan? FHA loans are an excellent alternative for those who don't qualify for conventional mortgages. They're available at competitive rates and cater to various borrowers.
However, because lenders view FHA loan borrowers as having higher credit risks, they demand mortgage insurance, making these loans more expensive overall. You need to consider every detail before going in for these loans seriously.
That said, there's always an opportunity to refinance later. For example, once you've achieved 20% equity in your home and have rebuilt your credit, you can refinance from a higher-interest FHA loan to a lower-rate traditional loan.
Contact local FHA lenders for further information about FHA loans. They should be able to help you make the right decision based on your income and credit history.