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

Are you looking to buy a home but have a lower credit score? Do you need a mortgage loan that has looser financial requirements? Union County, Florida's FHA Loans are ideal loan options for prospective homebuyers with credit score issues.

The FHA dates back to 1934 in the aftermath of the Great Depression. Congress created the agency to provide ordinary wage earners access to friendly mortgage terms. The FHA reduced the risk to lenders and increased the country's homeownership stats.

Many first-time home buyers prefer this loan option due to its low down payment and credit score requirements. Essentially, you only need a 3.5% down payment for a credit score of 580 to get approval for this loan.

While the FHA backs these loans, government-approved lenders issue them. FHA loans are suitable for borrowers who experience difficulty obtaining loans from private lenders.

In this guide, you'll learn more about FHA loans, their application requirements, and the loan limits in Union County, Florida.

Understanding FHA Loans

The Federal Housing Administration backs the FHA loans, meaning lenders are less likely to face losses when borrowers default. The FHA's backing allows lenders to offer these loans with low down payment requirements. Borrowers can also access these mortgages with lower credit score limits.

Many first-time buyers prefer this loan option because of the lenient requirements involved. However, FHA loans are ideal for anyone else who is not a first-time buyer.

If you have a shaky credit history and can't raise enough down payment, this loan will suit you perfectly. Besides, if you've had a bankruptcy before, you qualify for an FHA home loan.

While FHA home loans have multiple benefits, you still need to pay mortgage insurance once you receive the loans.

What does the FHA Mortgage Insurance Entail?

Once you get approval for your FHA loan, expect to pay the mortgage insurance premium. With this insurance, lenders won't suffer any losses when you default on your loan. Unless you pay a down payment of at least 10%, expect to pay mortgage insurance throughout the loan's life.

Also, remember that you'll need to pay mortgage insurance in two ways. First, you'll pay an upfront mortgage premium of 1.75% of the loan's amount.

Besides, mortgage insurance also entails an annual mortgage insurance premium. In most instances, the yearly payments amount to 1.05% of the loan amount.

FHA Loan Limits in Union County, Florida

FHA loan limits usually depend on your county of residence. The Department of Housing and Urban Development has set limits considering different counties' living costs.

For high-cost areas, borrowers have a loan limit of up to $970,800. On the other hand, low-cost areas have limits of as low as $420,680.

FHA home loan limits also depend on buying one-unit or multi-unit properties. In Union County, Florida, the loan limits range from $420,680 for borrowers who buy one living-unit home to $809,150 for those who prefer four living units.

FHA Interest Rates

Compared to conventional mortgages, FHA home loans come with competitive interest rates. Lenders offer lower rates thanks to the government backing that reduces their risk exposure.

Interest rates might also vary depending on prevailing interest rates and the amount you borrow.

Bankruptcy and Foreclosure

FHA home loans are ideal for people who've experienced bankruptcy and foreclosure in their credit histories. Unlike other mortgages, which require borrowers to wait a while before proceeding, FHA loans have a shorter waiting period.

With the FHA home loan, you only need to be out of bankruptcy for two years to apply for the loan. On the other hand, borrowers with foreclosure histories will only wait three years to qualify for the loan.

FHA Home Loan Requirements

You must meet specific lender requirements to get approval for an FHA loan. Most lenders will require you to find an FHA-approved appraiser to assess your house.

Besides, lenders will only approve an FHA home loan if they ascertain that you will use the money to buy your primary residence. You won't get approval for an investment property or second home.

Most lenders also request a home inspection to ascertain if the property meets minimum standards.

Besides the typical requirements that cut across the board, specific lenders might have different qualifications. These requirements usually include credit scores, mortgage insurance, income, and down payment amounts.

FHA Credit Score Requirements

Typically, your credit score will be a number between 300 and 850, representing how much credit you are worth. Your credit score usually depends on factors including credit utilization and your credit type. Your credit card debt also influences your credit score.

Most lenders offer approval for borrowers with a credit score of at least 580. You might get approval with a 500 credit score if you pay a higher down payment amount.

A higher score lets you qualify for an FHA loan with a higher debt-to-income ratio (DTI). DTI indicates the amount that you spend on debts every month. You can determine this ratio by dividing your monthly debt payments by your gross income.

A lower DTI boosts the chances of getting FHA home loan approval. The FHA typically requires a DTI of less than 43% to qualify for the FHA loan.

FHA Loan Down Payment Requirements

The down payment usually represents a percentage of the home's purchase price. Also, it is the amount that you'll need to pay upfront to acquire your home. Often, the down payment amount correlates with your credit history.

While many mortgage options have high down payment requirements, you can qualify for an FHA loan with a 3.5% down payment. However, you need a credit score of at least 580 to qualify for this down payment percentage.

Borrowers who can pay 10% as their down payment will qualify with a lower credit score, typically between 500 and 579. Lenders let you pay the cash down payments from gift assistance options. However, you must ascertain that the gift is not a loan in disguise.

Once you raise your down payment amount, do not store the amount under the mattress. Instead, open an account in your preferred bank and let it stay there for a while. Proceed with your house search and only withdraw the amount when you're ready to close the sale.

Income Requirements

You don't need to meet a specific income threshold to qualify for an FHA home loan. However, lenders require you to prove that you've had steady income streams. Your pay stubs, bank statements, federal tax returns, and W-2s are sufficient to verify your income.

Besides, your lender will request a valid social security number and proof that you live in the country lawfully. You should be of legal age to sign a mortgage at the time of application.

Property Requirements

The government backs FHA loans to encourage homeownership among low to moderate-income buyers. To qualify for an FHA loan, your lender must ascertain that you will use the home as your primary residence.

While you could use part of the loan for renovations, you won't get approval for real estate investments or a holiday home in Union County, Florida.

Most lenders will require you to hire an approved FHA appraiser to appraise the home. This appraisal usually seeks to determine whether or not your home qualifies for an FHA home loan. The loan amount you receive won't exceed your home's value.

Besides, you might need an inspection to determine if the home is habitable.

FHA Loan with inscription on blank notepad

Available FHA Loans

Which mortgage options could you consider if you meet the loan requirements? Typically, the loan you choose will determine how you spend the money you get. Therefore, it is essential to request the right loan type. Here are different FHA loan types.

Purchase loans

With a loan, you can purchase a home with a 3.5% down payment and a credit score of 580. Also, you'll need an equally low DTI to qualify for the loan with this credit score.

This traditional mortgage option finances your primary residence and helps you quickly achieve your dream of homeownership.

Rate/Term Finances

Do you have an existing mortgage and want to leverage lower rates? The FHA home loan rate/term refinance mortgage is ideal, especially if you have credit issues. This mortgage has less strict credit requirements.

Use the rate/term refinance to lower your rate or change your loan terms and save money. Refinancing also allows you to convert an adjustable-rate loan into a fixed-rate one. Besides, if you notice market volatility, you can use this loan option to lock in lower interest rates before market rates increase.

Rate and term refinancing is also valuable in securing a more favorable term on your existing mortgage.

FHA Streamline

The FHA Streamline isn't very different from the rate/term refinance. You can use this loan to refinance your loan with a couple of benefits.

With FHA Streamlines, you don't need to provide comprehensive documentation. Because of your existing loan, you can qualify for this loan with reduced appraisal documents and limited employment verification.

However, most lenders require you to have made six payments on your loan to qualify for a streamline. Besides, you should not have 30-day late payments in the last six months.

FHA 203(k) Loan

The FHA 203(k) loan is ideal if your new home requires renovations. Typically, the minimum FHA 203(k) loan balance is $5,000, and your home improvement project shouldn't go beyond six months.

You can opt for the standard or limited loans, depending on the projects you need to complete. Standard loans are ideal for large-scale projects, while limited loans will serve you best for smaller projects, although you'll need less paperwork to get approved.

The FHA 203(k) loan is essential for diverse projects, including:

  • Effecting structural changes to your home
  • Replacing your roof or gutters
  • Overhauling your flooring
  • Modernizing your home

Cash-Out Refinance

An FHA loan can also allow you to get a cash-out refinance. This loan option can convert your home's equity into cash. Complete documentation is necessary for the cash-out refinance.

A cash-out typically gives you cash when you take on a larger mortgage. You'll need to borrow more than you owe and then use the difference for your needs.

A cash-out refinance loan helps you improve your home without relying on credit cards or a second mortgage. You'll access lower interest rates compared to what you'll pay on credit cards.

Besides, you could also use the amount to pay off some of your debt or straightforward outstanding student loans. Overall, this loan option offers an inexpensive way of borrowing money for significant home expenses.

FHA Energy Efficient Mortgage

Do you want to lower your monthly utility bills? The FHA Energy Efficient Mortgage program helps you incorporate energy-efficient improvements into your new home. This mortgage option allows homeowners to make valuable home improvements without breaking the bank.

Before requesting this loan, you could ask a qualified energy assessor to perform a home energy assessment to determine areas that need improvement. With this loan, you can complete multiple home upgrades, including:

  • Installing energy-efficient windows and panes
  • Water heaters and heater installations
  • Roofing improvements
  • Furnaces and heat pumps
  • Duct system installations and repairs
  • Assorted heating and cooling systems

Upon qualification of the FHA loan, the energy-efficient mortgage can increase your total amount by 5% of the property's value. Also, you could get up to a 150% increase of the conforming Freddie Mac limit in Union County, Florida.

Down payment Assistance Programs

If you have difficulty raising the down payment amount, you can leverage the down payment assistance programs that Florida housing offers. These programs include:

The FL Assist Program

Florida Housing offers this program to enable eligible borrowers to get enough funds for a down payment. You will automatically be eligible for this loan assistance program if you qualify for the FHA loan. Besides, you also get up to $10,000 with this program.

Remember that this amount is non-forgivable. The amount becomes due in case of a sale, transfer, or satisfaction of your first mortgage. Also, if you refinance or cease to occupy the property, you'll need to repay the amount in full.

The Florida Homeownership Loan Program

The FL HLP Second Mortgage program also offers up to $10,000 for eligible borrowers. However, this assistance program comes with a monthly payment obligation and is ideal for a 15-year term. The monthly payments mean that your lender might consider it when assessing your debt-to-income ratio.

Getting Pre-approved for FHA Home Loans in Union County, Florida

Pre-approval is essential in the loan application process as it ensures you have a smooth home purchase process. During pre-approval, you will receive extensive insights into your financial situation. Also, you'll get to know your chances of getting approved for the loan.

Your lender will evaluate your financial position exhaustively. Essentially, they'll request documentation that highlights your employment, credit, assets, and existing debt. Upon completion, you will know your home's price range and ability to get financed.

Typical documentation required to ascertain your identity and financial information includes:

  • Social security card
  • Tax returns and W-2 statements
  • Divorce decree, where applicable
  • Documents that highlight other assets
  • Pay stubs of at least two consecutive months
  • Employment verification letter

The lender also provides a pre-approval letter that you'll present when making an offer. Homeowners prefer buyers with pre-approvals as it guarantees one's ability to secure financing.

Family Activities in Union County, Florida

Are you wondering how you'll keep your young ones entertained once you settle in Union County? Here are some activities to consider:

  • Explore the Lakeside Park at Lake Butler - The city park has a playground, picnic shelters, and a splash park that will intrigue your kids. Your teenage kids could also paddle their way into the expansive lake.

  • Visit Union County Historical Museum - Explore this bright, cozy museum that offers historical threads of the county. The shiny oak floors and bright rooms will tell the county's story and people.

  • Take on the Lake Butler State Trail - Find a bicycle and explore this state trail that takes you from Union Depot through Hampton to Palatka. The lake's scenic views will give you something to talk about once you get home.

  • Horseback Riding - Explore some barrel racing at the Union County Riding Club. If you are good enough, consider competing in pole bending, cloverleaf, and arena races.

  • Eat at Laredo Mexican Restaurant - Enjoy tasty Hispanic cuisines whenever you visit Laredo Mexican Restaurant. Try out Burrito Verde, Queso, or the Chicken Quesadilla. The fresh dishes never disappoint.

Should you Settle for An FHA Home Loan?

Are you in the market for a home loan option with a lower down payment and lenient credit requirements? An FHA home loan has got you covered.

This loan option is also ideal for borrowers with low-to-moderate income. Partner with an experienced lender to enjoy a seamless process.

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