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

Are you looking for a home loan with a lower down payment, low-to-moderate income, and lenient credit requirements? An FHA loan may be suitable for your situation. Compared to conventional loans, which are not government-backed and are offered through Freddie Mac or Fannie Mae, FHA loans are government-sponsored and non-conforming.

You don’t have to satisfy Freddie Mac or Fannie Mae’s requirements to qualify for one. As you start with FHA loans, you must understand how they work and the low-down payment options available.

Here’s a guide on the low-down payment options for an FHA loan in Volusia County, Florida.

What Is an FHA Loan?

With the backing of the Federal Housing Federation, FHA loans are nonconforming home loans that target low to moderate-income homebuyers. By insuring these loans, the FHA protects the lenders from incurring losses if they default on the loan. The Federal Housing Administration, which sponsors the loan, is an arm of the Department of Housing and Urban Development.

One good thing about FHA loans is that they come with lower minimum credit score limits and low down payment options. However, they require mortgage insurance to compensate for the low down payment requirement.

The option of more lenient credit and low down payment requirements makes an FHA loan highly suitable for first-time homebuyers. You can apply for a loan if it isn’t your first time buying a house. Some of the benefits of taking an FHA loan include:

  • Lower credit score requirements compared to other home loans

  • Lenders can accept low down payments

  • Option to qualify for the mortgage if you have financial issues such as a bankruptcy in your history

  • You can have the FHA closing costs into your mortgage

The 3.5 Percent Down Payment Requirement Explained

A down payment is usually a percentage of a home’s actual purchase and the upfront amount of money put down. Your credit score largely determines the minimum down payment you can make on an FHA loan.

The minimum down payment for an FHA loan if you have a credit score of 580 and above is 3.5 percent. Lenders can also allow you to make a 10 percent down payment if your credit score is between 500 and 579.

You can make cash down payments using gift assistance when taking an FHA loan. However, the cash down payments should be appropriately documented to verify the nature of the gift assistance, which should be a gift instead of a loan.

FHA Loan Requirements

Like other types of mortgages, FHA loans come with specific requirements you must meet when applying. For starters, the home you intend to finance with an FHA loan should be appraised by an FHA-certified appraiser. Also, lenders will only consider you for the loan if the home will be your primary residence rather than a second home or investment property.

You must occupy the home within 60 days after closing and have it inspected to see if it satisfies the minimum property standards. Other specific requirements that you need to meet include making mortgage insurance payments and being within certain income and credit score limits as discussed below:

Mortgage Insurance

FHA loans come with a mortgage insurance requirement over the life of the loan. You’ll have to pay mortgage insurance premiums with the mortgage to insure your lender against monetary losses in case you default on the loan.

Making a 10 percent down payment will attract mortgage insurance premiums you must pay for 11 years. You’ll have to pay the premiums over the life of the loan if you make a down payment of less than 10 percent.

The FHA mortgage insurance is split into two, an upfront mortgage premium and an annual premium. Lenders charge an upfront mortgage insurance premium of up to 1.76 percent of the base loan amount. They also charge an annual mortgage insurance premium ranging from 0.45 to 1.05 percent based on the length of your loan, total loan amount, down payment size, and the loan-to-value ratio.

Credit Score

The FHA allows lenders to impose credit score limits on FHA loans to gauge the creditworthiness of prospective homebuyers. A lot of factors go into the process of reviewing credit scores.

Your lender will look at the type of credit (loans or credit cards). They will also factor in your credit utilization (the amount of credit used) and whether you make on-time payments for your bills. The amount owed on your existing credit cards and the type of credit you’ve recently taken also matter in the review.

A higher credit score and a lower debt-to-income ratio can improve your chances of qualifying for an FHA loan. DTI (debt-to-income) ratio is the percentage of your total monthly income directed to settling debts divided by your total monthly income. A higher debt-to-income ratio can improve your chances of getting approved for an FHA loan if you have a higher credit score.

Your monthly mortgage payments shouldn’t take more than 31 percent of your total monthly income. Your DTI ratio should not exceed 43 percent if you want your FHA loan to be manually underwritten.

FHA Interest Rates

FHA interest rates tend to be highly competitive compared to conventional home loans. It’s mainly because the government sponsorship of these loans reduces the risk borrowers pose to lenders. As a result, lenders offer lower rates depending on income, borrowed amount, credit score, DTI ratio, and down payment amount.

Income Requirements

Instead of hinging on a particular income amount, FHA income limits require proof of steady employment history. You must verify your income with bank statements, federal tax returns, W-2s, and pay stubs.

Down payment Assistance Programs from Florida Housing

Florida Housing administers two down payment assistance offerings: the Florida Assist Second Mortgage (also known as FL Assist) and Florida Homeownership Loan Program Second Mortgage (FL HLP). With these programs, you can qualify for up to $10,000 in down payment assistance.

Florida Housing’s FL Assist program offers down payment assistance of up to $10,000 on government-backed loans such as FHA with a zero percent non-amortizing rate on a 30-year term. On the other hand, FL HLP offers the same down payment assistance limit but with a 3 percent fully amortizing rate on a 15-year term.

You’ll have to repay the FL Assist loan in full unless you cease to occupy the home, refinance your first mortgage or transfer the deed. FL HLP unpaid balances must also be paid in full unless you cease to occupy the home, refinance the first mortgage, or transfer the deed.

FL Assist and FL HLP programs allow you to enjoy down payment assistance loans such as FL; first, HFA Preferred for Bond and HFA Advantage for Bond. Their income limits rely on the requirements of the First Mortgage Loan Program, just like the purchase price limits.

Expect to pay down payment program fees when signing up for the FL Housing down payment assistance offerings. The FL Assist program requires a recording fee only, while the FL HLP program requires a recording fee and a servicing fee of $175 to serve as the Investor Servicing Fee on the second mortgage. You’ll also need program documents such as FL Assist Note and FL Assist Mortgage for the FL Assist program and FL HLP Note and FL HLP Mortgage for the FL HLP program, which is downloadable from the eHousing eHPortal.

Young couple handshaking real estate agent after signing contract

Why You Shouldn’t Store Cash for Your Next Home Purchase Under the Mattress

If you have savings that are not stored in a financial institution like a credit union or bank, consider taking them somewhere they can form a money trail, especially if you want to buy a home. Putting thousands of dollars under your mattress won’t help your case when applying for a home loan. You risk hurting your chances of qualifying for the loan in the long run.

One major issue with money hidden in your home is that there won’t be any paper trail when you want to get qualified for a mortgage. It will be difficult for your lender to verify the source of the cash, the savings date, or your financial habits and stability.

You need consistent, regular earnings and savings to assure lenders that you are more than capable of paying back the home loan, something that mattress money can’t provide. And lack of asset verification is among the significant reasons your loan may fail to fall through.

Your so-called mattress money source will be a concern when you approach lenders for a loan. Failing to prove the source of the funds may lead lenders to assume that they were obtained fraudulently.

Ways to Deposit the So-called Mattress Money

If you plan to apply for a home loan and buy a home sooner, consider putting any money you earn into a savings or checking account with a highly reputable bank (or financial institution). And if you already have large amounts of cash stashed under the mattress, consider opening a new savings account and depositing the total amount of money in.

Allow the deposited cash to stay in the account for two to three months since mortgage lenders require bank statements of at least 60 days, depending on the loan type, when reviewing your home loan application.

Inform your lender about the deposited balance as soon as you apply for a home loan. The sooner you share this information with the lender, the easier it will be to avoid unwarranted delays before the loan closes.

You may also spend the mattress money on utilities and other expenses but save your earnings in a bank account. A direct deposit can help simplify this process.

FHA Loan Limits for Volusia County, Florida

There’s no maximum limit to the amount you can borrow when considering an FHA loan. However, the loan limit will depend on the specific county in which your dream home is situated.

FHA loan limits are determined by county property values for one unit property. Expect a higher loan limit if you want to buy a property with multiple units.

Besides being able to buy a home with very little down payment, you get to enjoy loan limits between $420,680 (on a 1-unit single-family home) and $809,150 (on a 4-unit property) in Volusia County, Florida.

Activities for Kids in Volusia County, Florida

Situated in the east-central part of Florida, Volusia County, is home to many attractions that appeal to children and adults. Here are five children and family-friendly activities you may consider doing in Volusia County:

Unleash Your Kid’s Imagination at the Charles and Linda Williams Children’s Museum

Strategically located in a separate wing of the Museum of Arts, the Charles and Linda Children’s Museum is a 9-300 square-foot facility with plenty of learning activities. It is only the hands-on science center lying between Orlando and Jacksonville.

The children’s museum features interactive exhibits demonstrating many scientific principles that kids find amusing. These exhibits include a make-believe pizza parlor, video light microscope, tennis ball launcher, doctor and radiologist exhibits, and a race track.

Enjoy Hispanic Cuisine at Delicias Centro Americanas

Delicias Centro Americanas is a Central American restaurant in Daytona Beach with a diverse menu. The restaurant serves delicacies from Central America, including pastelitos salvadorenos, baleadas, pupusas, burritos and tacos. Other foods included in their menu include carne asada (grilled steak), grilled chicken, sandwiches, quesadilla (for kids), and chicken fingers (for kids).

Swinging and Sliding at Magic Forest Playground

Magic Forest Playground is a great place to take your kids if you want them to enjoy the warm weather. Ever Since it was revamped, the playground has accommodated kids of all ages. The park is shaded by plenty of trees and features different kinds of play items, including slides and swings.

Several safety measures are enacted in the playground to prevent kids from sustaining injuries. The facility managers are also always on standby to stop accidents from happening.

The Reptile Discovery Center

If you’re looking for a place to expose your children to different unique reptile species, the Reptile Discovery Center is the place to be. It accommodates Serpentarium, an enclosure for exotic and dangerous snakes like the Burmese python and king cobra, on display to the public. Outside the nature trail, you’ll find reptiles such as tortoises, lizards, and alligators resting undisturbed in their natural habitats.

New additions at the Reptile Discovery Center include a taipan and a rare white rattlesnake. The indoor exhibits accommodate mambas, cobras, and rattlesnakes, among other snakes worldwide. Besides watching reptiles, you can take your kids for a walk along the outdoor nature trail to enjoy the surrounding vegetation.

Kayaking at the Marine Discovery Center

For over 25 years, the Marine Discovery Centers have been educating and informing people about the biodiversity of plant and marine life along the Indian River Lagoon in Volusia County, FL. Your kids will learn more about New Smyrna Beach and its biologically diverse estuary.

Along the Indian River Lagoon lies a 150-mile landscape with over 4,000 species. The lagoon offers plenty of exciting ways to enjoy your time along the coastal waters of New Smyrna Beach.

The Marine Discovery Center offers programs for all ages centered on hands-on learning approaches. Your kids can enjoy these learning opportunities through kayak and boat ecotours, lectures, camps, and classes led by certified teachers and naturalists.

Summing up

FHA loans seek to increase homeownership by offering eligible homebuyers a cheaper and more convenient alternative to home loans. Unlike conventional mortgages, they simplify the home buying process with lenient credit and income requirements.

One significant benefit of the Florida FHA home loan is the 3.5 percent down payment required, which is cheaper than the 20 percent down payment that most conventional mortgages require. You can also seek down payment assistance programs, enjoy competitive rates, and use the loan more than once—all the best as you apply for an FHA loan in Volusia County, Florida.

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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