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

When weighing your options for a home loan, some mortgage experts will tell you to make a 20 percent down payment, while others will encourage you to put down less. If you are new to the mortgage market, deciding which recommendations to take can be challenging. FHA loans are among the best mortgage options if you want to put down less on your next home purchase.

Since the loan comes with backing from the FHA (Federal Housing Administration), it requires low down payments and offers better rates to qualified applicants. The FHA takes on the default risk from the lender, opening the door to more borrowers who otherwise would not qualify for a conventional mortgage.

But how does an FHA loan work, what are the requirements for getting one, and can it be used with down payment assistance programs in Pasco County, Florida? Learn more in this guide.

What is the FHA Loan Program?

The FHA loan program offers FHA loans to low to moderate-income borrowers, helping them afford homes. Its loans come with backing from the Federal Housing Administration, part of HUD (the Department of Housing and Urban Development). The government insures these loans to protect your lender against losses when you stop paying back the loan.

Once enrolled into the loan program, you have to pay mortgage insurance besides enjoying lenient credit score limits and low down payment options.

While FHA loans are highly appealing to first-time homebuyers, you don’t have to be one to apply and get qualified. Here are some perks that come with an FHA loan:

  • Credit score and debt-to-income requirements are lenient compared to other home loans

  • Lower down payment accepted

  • Closing costs can be included in your monthly loan payments

  • Ability to qualify if you have a bankruptcy, foreclosure, or any other financial issue

The 3.5% Down Payment Requirement

Home loans come with a down payment requirement, a percentage of a property’s purchase price that you need to pay upfront. The minimum down payment you must make on an FHA home loan is based on your credit score. FHA loans require a 3.5 percent down payment for applicants with a credit score not less than 580. If you can raise a 10 percent down payment, you only need a credit score within a range of 500 to 579 to qualify for the loan.

FHA-approved lenders also allow down payments made with gift assistance in cash. However, you need to prove that the gift assistance is indeed a gift, not a loan.

Down Payment Assistance Programs Offered by the Florida Housing Finance Corporation

The Florida Housing Finance Corporation (FL Housing) is an agency established by the Florida legislature over four decades ago to help offer a wide range of homeownership opportunities to Floridians. It seeks to improve communities across the Sunshine State by making them great places people can live, work and conduct business. The agency is always on a mission of providing innovative, data-driven, fiscally sustainable, and measurable solutions that can address the obstacles to affordable housing in Florida.

FL Housing offers two types of down payment assistance programs if you want to buy a home with a mortgage. These programs include FL Assist (Florida Assist Second Mortgage) and FL HLP (Florida Homeownership Loan Program).

You can qualify for a zero percent non-amortizing down payment assistance of up to $10,000 on a government loan such as an FHA loan with the FL Assist program. The FL HLP program offers 3 percent fully-amortizing down payment assistance of up to $10,000 on government-backed loans like an FHA loan. The repayment term of an FL Assist loan is 30 years, while an FL HLP loan is 15 years.

How Stashing Cash Under the Mattress Can Hurt Your Creditworthiness

While you may want to stash your savings as cash under the mattress, doing so can harm your creditworthiness. It’s high time to move them to a bank or credit union and watch the money accumulate interest. Storing money under the mattress will also not be a good idea if you plan to use part of it to make a down payment for a home loan and prove your financial stability.

The problem with money stashed away in a hidden location is that it leaves no paper trail for lenders and other financial institutions looking to qualify you for a loan to follow. It will therefore be difficult for lenders to verify the actual source of the finances, the day you started saving, and whether they are indicative of your financial health and habits in the long term.

One of the requirements of an FHA loan is consistent, regular savings and income, which allow lenders to determine if you are qualified enough to repay a loan. While mattress money will reveal that you have some money saved up for the down payment, it won’t offer solid proof that you can sustain monthly loan payments.

Besides the lack of paper trail, your lender may be concerned about the money stashed under the mattress. This is because mortgage lenders are regulated and can be held liable for transacting with borrowers suspected of obtaining funds through illegal means such as money laundering and theft.

Ways to Deposit the “So-called Mattress Money”

Make a habit of putting your earnings in a checking or savings account managed by a trusted financial institution if you plan to buy a home and apply for a mortgage soon.

If you already have a stack of cash hidden in your house, open a savings account with a financial institution and deposit the cash in.

Leave the deposited cash in the account for two to three months since lenders need bank statements of at least 60 days to consider you for a home loan. You risk having delays as your loan is being processed if you didn’t deposit the cash early enough to have verifiable bank statements.

Besides putting the mattress money in a savings account, you can direct it towards utilities or bills to create a paper trail. You should also direct paychecks and other forms of income to your savings account as you prepare to apply for a home loan.

What are the FHA Loan Limits for Pasco County, Florida?

Your FHA loan limit will determine the maximum amount you can take as an FHA loan. It largely depends on the location (county) of the home you intend to finance using an FHA loan.

Expect a higher loan limit (of $970,800) if you are purchasing the home in a high-cost or large metropolitan area. The FHA loan limits for lower-cost areas can go as low as $420,680, depending on the property value in that particular county. Since these loan limits apply to one-unit homes, expect higher limits for multi-unit homes financed with an FHA loan.

A person holding coins putting in glass for down payment

FHA Loan Requirements

FHA-approved lenders set requirements that you need to meet to be considered for an FHA loan. Some of these requirements include the following:

  • Properties that have passed the FHA home appraisal process

  • The home to be financed with an FHA loan has to be your primary residence instead of a second home or investment property

  • You have to occupy the home at least 60 days after closing

  • The home must be inspected to determine if it meets FHA’s minimum property standards

Besides these basic requirements, you must satisfy certain conditions for the lender to qualify you for an FHA loan. These conditions cut across loan limits and down payment amount, credit score, income, and mortgage insurance requirements, as discussed in more depth below:

FHA Mortgage Insurance

Since FHA loans require a down payment of less than 20 percent of the loan amount, they attract mortgage insurance premiums (MIP). These premiums are put in place to cover lenders’ losses if a borrower defaults on a loan.

Expect to pay mortgage insurance premiums for the life of the FHA loan unless you put at least 10 percent down, in which case; the premiums will be charged on the loan for up to 11 years.

Lenders require you to pay mortgage insurance with a 1.75 percent upfront fee on the base loan amount. They also ask you to pay an annual MIP depending on the size of your down payment, total mortgage amount, loan-to-value ratio, and the mortgage term (length). The annual MIP payments range between 0.45 to 1.05 percent of your FHA loan amount.

Credit Score

Though FHA loans have lenient credit score requirements, there is a credit score limit that lenders require you to satisfy before approving you for a home loan. Your credit score will be based on the following factors:

  • The type of credit you currently have
  • The amount of credit you use
  • Your ability to pay utilities or bills on time
  • The amount owed on credit cards
  • The amount of credit (new and recent) you take on

Besides your credit score, your debt-to-income (DTI) ratio will also factor in the loan application process. Your DTI ratio is used to weigh your monthly debt payments against your monthly gross income. A lower DTI would be ideal for an FHA loan since it suggests that you have manageable debt obligations.

According to the FHA, your monthly FHA loan payments should be less than 31 percent of your total monthly income, while your DTI should be less than 43 percent. Despite this, you may still qualify for an FHA loan with a higher DTI but a higher credit score.

Income Requirements

While your eligibility for an FHA-backed loan isn’t tied to a particular income limit, lenders still expect proof of consistent employment history. You have to verify whether you are formally or informally employed in your loan application to improve your chances of getting approved.

You can verify your income in the application through federal tax returns, bank statements, and W-2s. Either way, the documents needed for the verification will depend on the type of employment and income sources.

Top Five Kids’ Activities in Pasco County, Florida

With a population of over 561,691 residents, Pasco County lies on the west central coast of Florida. With over 100 miles of managed recreational centers, including artificial reefs and parks, Pasco County is inviting to both adults and kids.

Here are five family and children family activities you can engage in while staying in any town or city in Pasco County.

Take a Tour of the Pioneer Florida Museum

The Pioneer Florida Museum is committed to encouraging, fostering, promoting, and educating public interest in Florida’s history and life from the pioneer times until late 1945. To meet this goal, the museum regularly collects, acquires, restores, preserves, interprets, exhibits, researches, and then publicizes historically significant items. Through organized community efforts, this goal comes to fruition.

You can take your kids to Pioneer Florida Museum to help them learn the values Florida’s forebears lived by, the value of craftsmanship, and the dignity of labor in ancient times. Among the artworks on display are tools that the Florida Pioneer Man used in house building, furniture making, plowing, harvesting, leather work, and blacksmithing.

Enjoy Latin Cuisine at Kytos Pastelitos

Kytos Pastelitos is one of the best restaurants in Pasco County, Florida, to get a taste of Latin cuisine. The restaurant’s menu comprises foods such as steak and cheese empanadas, spicy chicken, lunch beef, and deep-fried pork chop.

You’d want to take your kids and family to Kytos Pastelitos for their family-friendly setting and fresh, crispy empanadas. The restaurant stands out for authentic Latin cuisine with an unmatched atmosphere complementing the delicacies.

Enjoy Thrilling Adventures at Urban Air Adventure Park

If your kids are a huge adventure find, you may want to consider Urban Air Adventure Park as you explore what Pasco County, Florida has to offer to both residents and visitors. Your kids can get their adrenaline up by defying gravity and conquering obstacles at different fun spots the park has to offer. With attractions appealing to any adventurer level, your kids and family members will find something that suits their adventure tastes.

Each adventure package is customized to fit your budget, children’s preferences, and experience levels. You can also decide to bring your kids to Air Adventure Park on a weekly or monthly basis depending on the package you choose.

Partying at the BB Kidz Zone

If you want a facility with many party packages, be sure to turn to BB Kids Zone. The facility’s packages include playtime (lasting for one hour and 30 minutes) in an exciting playroom and a forty-five-minute relaxation session in a private party room after playtime.

BB Kidz Zone is known for taking the hassle out of kids’ party planning by offering personalized party favors, invitations, foods, and eating utensils. The managers at BB Kidz Zone ensure that the facility is clean and secure for the safety of the children.

Grow Your Kid’s Enthusiasm in Sports at the Get Air Trampoline Park

Get Air Trampoline Park offers a long list of park activities, from ninja obstacles and slamball to dodgeball, foam putts, and wall-to-wall trampolines. Visit the park with your kids and let them bounce off trampolines, and also get a chance to explore the Kiddie Court, a fun area specifically designed for children below 46 inches in height.

And if you’d like your children to soar through the air and land in a giant foam pit, be sure to take them to Get Air Trampoline Park. The facility is perfect for family reunions, corporate gatherings, team sports events, and birthday parties.

Summing up

An FHA loan is an excellent choice if you can afford monthly mortgage payments but meeting the lenders’ requirements on a conventional loan is quite difficult. Once you qualify, the loan will entitle you to low-interest rates, a low down payment, low mortgage insurance, and flexible repayment terms.

Be sure to work with a trusted lender in Pasco County, Florida, and do some calculations to anticipate the loan costs and other obligations you are supposed to meet.

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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