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

Though homeownership has, for years, been associated with the American dream, it's getting harder to achieve. This is particularly true if you live or plan to live in Florida, with fluctuating housing prices and strict mortgage lending requirements. As you face these barriers to homeownership, you'd probably want a viable solution.

An FHA loan can help you realize your dream of owning a home. Backed by the US Federal Housing Administration, the mortgage is easier to qualify for even when you can't afford a large down payment or have a low income and credit score.

FHA loans are mainly appealing to first-time home buyers. You can also turn to them if you've recently bought a home. This guide will discover what it takes to qualify for an FHA loan and the down payment assistance programs you can use with the loan.

Understanding FHA Loans

FHA loans are a particular type of government-backed loan since they come with a 3.5 percent down payment requirement. The FHA fully insures these loans, protecting your lender against financial losses if you default on the loan.

Despite having lower minimum credit score limits and low down payment options, FHA loans also require mortgage insurance. The good thing with the mortgage insurance premiums is that they are affordable compared to conventional loans.

Features such as lenient credit and income and low down payment requirements make an FHA loan attractive to first-time and seasoned homebuyers.

Your lender can also qualify you for the loan if you have financial challenges such as a bankruptcy in your history. They can also roll the total closing costs into your loan payments.

FHA Loan Requirements

Reviewing the FHA loan requirements will give you a rough idea of what to expect before starting the loan process. The basic requirements you need to meet for lenders to qualify you for the loan include the following:

  • Have the home appraised by an appraiser with FHA approval

  • Only use the new FHA loan on a home that will be your primary residence rather than a second home or investment property

  • Occupy the home at least 60 days after the closing date

  • Have the property inspected to confirm whether it meets FHA's minimum property standards

You must satisfy specific conditions, including loan limits, credit score, mortgage insurance, and a down payment amount. We'll explain these factors in detail below:

The 3.5 Percent Down Payment Explained

FHA-backed loans require a down payment amount, a percentage of the property's purchase price. Lenders base this amount on your credit score (a number used to determine your creditworthiness). The down payment is also an upfront amount lenders expect you to put down for that particular property.

For a credit score limit of 580 and above, your lender will require you to make a 3.5 percent minimum down payment. They will also allow you to make a 10 percent down payment for a credit score limit between 500 and 579.

Even without down payment savings, you can use cash from a gift assistance program to pay the down payment amount. However, lenders expect you to prove (with adequate documentation) that the gift assistance is indeed a gift rather than a loan.

Mortgage Insurance on FHA Loans

Most home loans, FHA loans included, that have low down payment options come with a mortgage insurance requirement. Lenders put into place this requirement to protect themselves against potential financial losses if you default on an FHA home loan.

You have to pay a mortgage insurance premium (MIP) over the life of your FHA loan. This condition can be waived to allow you to make the MIP payments for ten years if you put a minimum of 10 percent down on the property.

FHA-approved lenders assess mortgage insurance in several ways. They usually charge an upfront fee of 1.75 percent of the base loan amount. Your lender will also ask you to pay MIP in the form of an annual fee between 0.45 and 1.05 percent of your base loan amount based on the loan amount, down payment size, LTV (loan-to-value) ratio, and loan term (length).

Credit Score and DTI Requirements on FHA Loans

One of the major perks of taking an FHA loan is lenient credit score requirements. And the factors used to determine your FICO credit score include the following:

  • How much new and recent credit is taken on
  • The total amount owed on credit cards
  • Your ability to settle bills on time
  • Your credit utilization (how much credit is in use)
  • Type of credit (loans or credit cards, among others)

A higher FICO credit score might qualify you for an FHA loan with a high DTI (debt-to-income) ratio. Your DTI ratio (expressed as a percentage) is calculated by dividing your gross monthly debt payments by your gross monthly earnings (which is your monthly income before tax deduction). DTI, in this context, relates to the percentage of your gross monthly income dedicated to paying bills.

A lower DTI ratio will improve your chances of qualifying for an FHA loan with more lenient requirements. On the other hand, a higher debt-to-income (DT() ratio can get you a home loan provided your credit score is high.

The FHA requires you to ensure that your monthly loan payments are less than 31 percent of your gross monthly income. Your DTI ratio is also expected not to be above 43 percent of your gross monthly income for a manually underwritten loan.

FHA Interest Rates and Income Requirements

FHA loans boast very competitive rates in the mortgage market compared to other home loans. This is thanks to the FHA backing, which reduces the risk you pose to lenders, thus allowing lenders to give you a low rate on your loan.

The interest rates depend on your down payment amount, income, credit score, prevailing interest rates, and DTI ratio, among many others.

While FHA eligibility requirements don't necessarily hinge on a set income amount, lenders need proof of steady employment history. You must also verify your income with bank statements, federal tax returns, pay stubs, and W-2s.

FHA Loan Limits for Madison County, Florida

The good thing with FHA loans is there's no particular limit to the FHA loan amount you can borrow and quality for. But the county where your dream home is situated will determine how much you can take as a loan.

The maximum loan you can take on a house located in a high-cost or large metropolitan area is $970,800 as of 2022, according to the HUD (US Department of Housing and Urban Development. On the other hand, the maximum loan amount allowed in low-cost areas is $420,680.

FHA's county-specific loan limits usually rely on the current county property values. And since there are certain limits for one-unit homes, expect higher limits if you intend to use an FHA loan to finance a property with multiple units.

In Madison County, Florida, FHA's county-specific limits range from $420,680 for single-unit homes to $809,150 for homes with up to 4 living units.

Word FHA written on blackboard and jar filled with coins

Down Payment and Closing Assistance Programs from Florida Housing

Did you know that you can enroll in Florida Housing's down payment assistance programs and qualify for up to $10,000 in down payment assistance? Well, as a first-time homebuyer in the Sunshine State, you can turn to plenty of resources for help on your home loan costs.

The Florida Housing Finance Corporation (FL Housing) is one of them since it offers several down payment and closing assistance programs for your first home purchase.

FL Housing's programs can help you if you are a first-time homebuyer or have never owned and occupied residential property in at least three years. They are also open to qualified veterans, active military members, or anyone buying a home in a federally-designated target area.

Here are the two down payment assistance programs from Florida Housing you may be eligible for:

The Florida Assist (FL Assist)

Offering a maximum loan amount of $10,000 on FHA, USDA, VA, and conventional loans, the FL assist is a zero percent, non-amortizing, deferred second mortgage program.

The loan isn't forgivable, but the repayment can be deferred.

The Florida Homeownership Loan Program (FL HLP)

With a maximum loan limit of $10,000, the FL HLP is a 3 percent fully amortizing, second mortgage program offering loans with a term of up to 15 years.

The second mortgage requires monthly payments and allows the outstanding unpaid principal balance to be deferred.

Should You Stash Money for a House Purchase Under the Mattress?

There was a time when some people were afraid that the banking systems in the US would crash and go down with their deposits. Most resorted to stashing money under mattresses or other hidden locations in their homes.

While it's pretty tempting to turn to this approach amidst a market meltdown, you risk lowering your chances of getting qualified for a home loan or affording a home purchase. It may be difficult for lenders to allow you to use the hidden cash as a down payment for your next loan. This is because verification of assets and income is an essential requirement in the loan application process.

Not only do you need to deposit your cash savings in a savings account, but you also have to let the cash stay there for a period not less than 60 days. This allows lenders to account for the money through bank statement cycles. You also have to properly document any cash gifts from friends or family to prevent them from being labeled as loans.

If you plan to use a home loan to finance your new home, deposit money in a bank as quickly as possible. Once you make the deposit, the bank will file a CTR (Currency Transaction Report) to the IRS with the deposit amount and your personal identifying information.

Ways to Deposit that Money

Since raising a down payment is the first critical step in the home buying process, it requires utmost discipline as you save money. It also requires a high degree of thought about where to deposit the funds.

Depending on your homeownership timeline, you may want to consider a stock market, an online bank, or a traditional bank to save thousands of cash for your down payment.

Choose a financial institution that balances risk, flexibility, timing, and reward as you intend to save for a down payment. Whichever financial institution you choose for the savings, ensure that the money can be accessed easily and fast when it's time to make a down payment. The money should also be in a form that is easy to transferable and should have earned a return.

Depositing the stack of cash in a savings account at a credit union or bank where most of your checking is done is undeniably the easiest choice. The financial institution will allow you to open savings account faster as an existing client and readily transfer the cash to the account. You can do the transfers through recurring deposits every payday or manually in cash.

Opting for a high-yield savings account will be a good idea if you want the money to earn more interest. Consider opening a high-yield savings account at your current bank to enjoy this benefit.

Activities for Kids in Madison County, Florida

In the north-central part of the Sunshine State, Madison County exudes Southern hospitality. A walk through its towns will let you explore a mansion once used to treat Civil War victims and antebellum architecture.

Besides these sceneries, Madison County, Florida, has plenty of children-friendly opportunities to explore with your kids, as discussed below.

Water Sports at Ragans Family Campground

Formerly known as Yogi Bear's Jellystone Park, Ragans Family Campground is the only Yogi Bear's Jellystone Park in Florida. It is an easy short drive away from some of the most fantastic attractions in Florida and Georgia.

The park boasts plenty of water attractions to keep your kids cool in the Florida sun. These attractions include a 60-foot water slide, Water Wars, Downpour Derby, splash pad, and lazy river.

Besides these water features, the park offers boat rentals, mini-golf spots, game rooms, jumping pillows, and fishing opportunities to keep your kids entertained.

Picnicking and Wildlife Viewing at Madison Blue Spring State Park

Madison Blue Spring State Park features a crystal-clear, first-magnitude spring perfect for cave diving and swimming. It also encompasses scenic woodlands of pines and mixed hardwoods, creating a picturesque surrounding for wildlife viewing, paddling, and picnicking.

The state park also offers a spacious volleyball court and picnic pavilions for recreation and family reunions.

Paddling at Withlacoochee River (North) Paddling Trail

The North Withlacoochee River is a great paddling spot since it magnificently curves through Twin Rivers State Forest, passing crystal-clear springs, sandbars, and hardwood forests.

As a state-designated paddling trail, it offers scenic views of the surrounding wildlife and allows primitive camping.

Experience North Florida Community Artist Series at Van H Priest Auditorium

Since its debut back in 1959, the North Florida Community College Artist Series has grown to feature world-class arts education and performing arts events.

You can take your kids to Van H. Priest Auditorium for performances ranging from classical to contemporary from September to March. The shows include children's theater events, country and rock tributes, jazz and blues, ballet, big band sounds, and classical concerts.

Learn About Madison County's Heritage at the Treasures of Madison County Museum

Treasures of Madison County offers exciting ways for children and adults to learn about the cultural heritage of Madison County. The museum features fascinating exhibits and displays, making it an excellent resource for learning about the past.

Take an exciting trip down memory lane with the over 3,000 photographs, Civil War clothing, lifestyle facts, military service, and agricultural heritage items on full display at the museum.

Summing up

FHA loans are government-backed loans allowing you to buy a home with less strict financial requirements. You may opt for this type of loan if you have a lower credit score or cannot raise the high down payment amount demanded by conventional mortgage lenders.

Good luck qualifying for an FHA loan in Madison County, Florida, and enjoying the home loan's benefits.

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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