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

We can all agree that finding a home loan with favorable eligibility requirements is one of the biggest obstacles to homeownership. If your earnings are low and you can't raise a sizeable down payment, as conventional home loans require, you'd want a mortgage with low down payment options and lenient credit requirements.

And among the mortgage options, an FHA loan seems to tick all of these boxes. Compared to home loans that aren't government-sponsored and are offered through Fannie Mae and Freddie Mac, FHA loans come with backing from the Federal Housing Administration. You won't have to meet the strict Fannie Mae and Freddie Mac lending requirements to be approved.

As you consider financing your next home purchase with an FHA-backed loan, it's crucial to understand how the home loan works and what is expected of you.

Here's everything to get you started on the low-down payment options for FHA loans in Santa Rosa County, Florida.

What is an FHA Loan?

As the name suggests, an FHA loan is a non-conforming home loan partially guaranteed by the FHA. It targets low to moderate-income borrowers recently denied affordable mortgage opportunities.

Operating as an arm of the Department of Housing and Urban Development, the FHA insures these home loans to ensure that lenders don't incur significant risks when originating the loans.

You may be drawn to FHA loans thanks to the low down payment options and low minimum credit score limits they boast. And since you'll be enjoying a mortgage that lets you make a small down payment, expect to pay a small mortgage insurance premium.

FHA loans are highly suitable for first-timers in the mortgage and housing market. They also come in handy if it's not your first time financing a home purchase with a loan. Either way, their perks include the following:

  • Low credit score limits

  • Low down payment options

  • Ability to get approved even with financial issues on your background

  • Closing costs can be rolled over to the monthly loan repayments

The 3.5 Percent Down Payment Requirement, Broken Down

Perhaps the most appealing feature of FHA loans, the 3.5 percent down payment is based on the percentage of the home's purchase price and the upfront fee put down when looking to buy the home. Lenders also base this amount on credit scores, meaning a higher credit score translates to a lower down payment. Expect to put 3.5 percent of the FHA loan amount down if your credit score is 580 or more and 10 percent for a credit score in the 500-579 range.

Besides saving for the down payment amount, you can use gift assistance programs to help raise the amount. However, you need to document the source of the funds before your lender allows you to use them for this purpose.

FHA Loan Requirements

As you inch towards the FHA loan process, expect to encounter specific lender and FHA-specific requirements on the way. For starters, the FHA requires you to have the property appraised by an FHA-approved appraiser to determine if its sale value is almost similar to other resembling properties in that area.

After closing, you also need to prove that you will be occupying the new home as your primary residence. This is because the Federal Housing Administration isn't in the business of backing loans used to purchase investment properties or vacation homes.

You only have 60 days after closing to move into the new home and inspect it to determine if it adheres to FHA's minimum property standards. Also, you will have to satisfy the conditions discussed below to improve your chances of qualifying for an FHA loan.

Mortgage Insurance

Mortgage insurance is essential to FHA loans since it prevents lenders from dealing with defaulted payments and incurring losses. The mortgage insurance premiums are paid throughout the loan, but you can have them reduced to a specific time frame.

A 10 percent down payment can be convincing enough for your lender to reduce the mortgage insurance timeframe to 11 years. On the other hand, a down payment of less than 10 percent of the loan amount will mean that the premiums need to be paid over the life of the loan.

Either way, mortgage insurance on FHA loans takes the form of an upfront fee and a yearly fee. The upfront fee is usually 1.76 percent of your loan amount, while the yearly fee is 0.45 to 1.05 percent, depending on the loan term, loan amount, loan-to-value ratio, and down payment made.

Credit Score

FHA-approved lenders set credit score limits to gauge your creditworthiness when looking to buy a home using an FHA loan. They consider the following factors when reviewing your credit score:

  • Your existing credit types
  • Your credit utilization
  • Your ability to pay bills on time
  • The amount owed on your current credit cards
  • Type of credit you recently took

Your credit score and debt-to-income ratio (DTI) can help or ruin your chances of qualifying for an FHA loan. DTI, in this context, is used to weigh your debt obligations against your monthly earnings.

Most FHA-approved lenders will compete for your business if you have a lower debt-to-income ratio and a high credit score. Your chances of qualifying for an FHA loan with a higher DTI can only improve if you have a high credit score.

The FHA requires you not to use more than 31 percent of your monthly earnings on making monthly loan repayments. You'll need a DTI below 43 percent for lenders to approve you for an FHA loan.

FHA Interest Rates

FHA home loans undeniably have the lowest interest rates you can ever find in the mortgage market. The competitive rates come around thanks to the government backing on the loans. Your lender will offer you a low-interest FHA mortgage depending on your income level, loan amount, FICO credit score, DTI, and down payment amount.

Income Requirements

The income requirements on FHA home loans don't cling to a particular amount. Instead, they solely rely on your employment history. Your lender will require you to submit your most recent pay stubs, W-2s, bank statements, and federal tax returns to verify your employment status and income level.

FHA Loan Limits for Santa Rosa County, Florida

FHA loans have county-specific limits you must be aware of as you shop for one. The limits apply to the particular location the home you intend to buy is located. They also reflect the overall living costs in that area and the number of units that make up the home.

In Santa Rosa County, Florida, the FHA loan limit for a single living unit home is $420,680, while the limit for a multiple units (up to 4 units) property is $809,150. And since these limits change every year, it's essential to refer to the FHA loan limits web page for Santa Rosa County, FL, for the updated FHA loan limits.

A Person Looking at FHA Loan Application Form

Down payment Assistance Programs from the Florida Housing Finance Corporation

Saving for a down payment on a house in Santa Rosa County, Florida, can be pretty challenging if you face financial constraints. As you look for ways to raise the amount, consider the down payment assistance programs the Florida Housing Finance Corporation offers.

These programs include the Florida Homeownership Loan Program (FL HLP) and the Florida Assist Second Mortgage (FL Assist). They may be appealing to your situation when looking to take an FHA loan, thanks to the $10,000 loan offered.

However, both programs have conditions that set them apart. Specifically, the FL Assist program offers a maximum of $10,000 as down payment assistance on government-sponsored home loans such as FHA, USDA, and VA and conventional home loans. The loan comes from a zero percent non-amortizing rate second mortgage payable in 30 years.

On the other hand, the FL HLP program offers the same down payment amount as a 3 percent fully amortizing second mortgage payable in 15 years.

As with most down payment assistance loans, the down payment assistance offerings from FL Housing attract sign-up fees. The FL Assist program, in particular, has a recording fee requirement, while the FL HLP program has a servicing and recording fee requirement. Be sure to familiarize yourself with other conditions for the FL Housing offerings on the eHousing portal.

Why it isn't a Good Idea to Keep Money for Your Next Home Purchase Under the Mattress

Do you have stacks of cash secretly hidden in your home since you don't want to deposit them at a bank? You should consider taking them to the bank if you plan to buy a home in the near future. This is because the stacks of cash won't earn any interest if you hide them indoors and won't leave a paper trail that mortgage lenders need to verify your income and financial stability.

Most lenders consider down payments made with cash that's unaccounted for as a red flag. They may consider the money as proceeds of illegal activity. And since they want to protect their reputation, lenders will reject the payment and even signal the authorities if they suspect a possible money laundering scheme.

The longer the cash stays hidden in your house, the harder it becomes to prove its source. You will also lose out on the interest it could have earned in a bank when kept there for at least 60 days.

Ways to Handle the So-called Mattress Money

It's wise to start organizing your funds a few months before you consider applying for a home loan. You can organize your finances by depositing them in a separate checking and savings account with a trusted banking partner.

Leave the money in the account for not less than two months to allow interest to be earned and a paper trail to be formed. Also, keep depositing part of your earnings in the account until you reach a specific target amount.

Consult your lender about their down payment requirements as you grow your savings. Inquire about the deadline for making the payment and other loan costs you need to pay. The goal here is to avoid delays in the loan application process.

Activities for Kids in Santa Rosa County, Florida

Santa Rosa County, Florida, is a growing tourist destination in the northwestern part of Florida. Thanks to its access to protected parks for camping, hiking, kayaking, and beaches, it has become one of the must-visit places in the Sunshine State.

And if you're looking for fun-filled activities to enjoy with your kids in Santa Rosa County, Florida, here are the options to consider:

Strolling at Navarre Beach Pier

Navarre Beach Pier offers plenty of recreational activities for families and kids as the longest pier in the Gulf of Mexico and entire Florida. You can fish or stroll at the pier, which stands 30 feet above sea level and is 1,545 feet long. There's also a privately owned bait at the pier where you can rent a fishing pole and an outdoor restaurant to enjoy the cool breeze.

Whether looking for the perfect spot to enjoy magnificent sunset views with your family or a place for world-class fishing, the Navarre Beach Pier is the place to be. Admission is free for people with visual or mobility impairments and disabled veterans. All admissions entitle you to a fishing license. And at the pier, you'll find 16 handicapped accessible railing locations and an entrance ramp.

Wildlife Viewing at Gulf Breeze Zoo

As a 50-acre park in Gulf Breeze, Santa Rosa County, Florida, the Gulf Breeze Zoo features displays of over 200 animals. A stroll through the zoo will enable your family to see many animals, including tortoises, marsupials, big cats, and primates. You'll also meet Kelly and Gibson, two baby giraffes that the zoo accommodates.

Gulf Breeze Zoo is also the perfect spot in Santa Rosa County, Florida, to watch many birds wandering freely. You can catch that miniature train at the zoo for a 20-minute ride across a 30-acre enclosure housing African wildlife, including hippos, rhinos, zebras, antelope, and Impala.

Canoeing and Kayaking at Blackwater River State Park

Ever since it was opened to the public, Blackwater River State Park has been known for its historic timber industry, sawmills, and historic trams. The park is also a go-to destination for kayakers and canoeists since it offers a wide range of water sports activities. Blackwater River, in particular, is among the purest sand-bottom rivers in the country and is renowned for paddling, camping, fishing, and swimming.

You can find shaded campsites a walking distance from the river and a picnicking pavilion overlooking the river. There are also trails stretching across over 600 acres of unoccupied natural terrains. Your family can enjoy canoeing, kayaking, tubing, snorkeling, star gazing, touring historic sites, fishing, hiking, boating, bicycling, swimming, and bird watching.

Explore the National Naval Aviation Museum

If your children are interested in learning about naval aviation, take them to the National Naval Aviation Museum. As the world's largest museum of its kind and one of the most visited museums in the Sunshine State, the facility features over 150 magnificently restored aircraft representing Coast Guard, Marine Corps, and Navy aviation.

You get to see these aircraft displayed outside the museum's 37-acre grounds and inside its 350,000-square-foot exhibit space. Admissions to the National Naval Aviation Museum are free.

Connect with Marine Life at Gulfarium Marine Adventure Park

You can spend the day with your kids discovering new things about marine life, enjoying sea lion and dolphin shoes, and exploring animal exhibits at Gulfarium Marine Adventure Park. Walk around the marine park for a glimpse of marine reptiles, mammals, birds, and fish.

The park can allow you to sign up as a trainer for a day or discover penguins, sea turtles, seals, and dolphins. This is because it was established to educate, entertain and inspire people on marine life preservation by offering memorable experiences for anyone looking to connect with marine wildlife.

Summing Up

FHA loans are the perfect solution if you're a home buyer looking for a cheaper but convenient alternative to conventional home loans. They make it easier to afford a home thanks to their low down payment options, lenient credit and income requirements, and competitive interest rates.

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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