Florida Bond First and Second Mortgage: All You Need to Know

Under the FL Housing First Mortgage Bond Loan program, prospective homebuyers whose income is equal to or less than 80% of the average median income (AMI) are eligible to receive down payment assistance of up to $7500 via FL First and HFA Preferred Loans. Additionally, borrowers who qualify for the FL Housing First Mortgage are automatically eligible for FL Housing Second Mortgage, which provides them with funds that they can use to cover some of the costs of their first mortgage.

By leveraging these home financing products, you could potentially become a homeowner with very little cash out of pocket. However, it is important to understand the requirements and conditions that must be satisfied to be considered eligible for Florida Housing First and Second Mortgage. So, in this guide, we’re going to break down the income requirements for Florida Housing First and Second Mortgage to help you understand how to qualify for these products.

Eligibility Requirements for FL Housing First and Second Mortgage

As highlighted at the outset, applicants seeking home financing aid via the FL Housing First and Second Mortgage must satisfy a number of minimum qualifications to be eligible for the loan. Below is an in-depth look at each of these requirements.

1.  Income Limit Requirement

In order for an applicant to qualify for FL Housing First and Second Mortgage loans, their income must not exceed a given amount as stipulated by the program. This income limit requirement is designed to ensure that low and medium-income earners who need home financing aid benefit from the loan products offered by FL Housing.

How Is Income Determined?

When calculating a borrower’s household income, participating lenders must determine the gross monthly income and current gross annual income (also known as program qualifying income or compliance income). It is worth noting that the program qualifying income is not the same as credit qualifying income. While the former is used to determine borrowers’ eligibility for the First and Second Bond loan program, the latter is used during the underwriting process to score their qualifications for the FHA or USDA loans.

The program qualifying income takes into consideration the income of the borrower, their spouse, and any adult occupants of their home, whether related to them or otherwise. Moreover, this rule takes into account the incomes of all adult members of the household whether or not they are party to the loan.

The gross monthly income of the borrower, as well as all adult household members, is cumulated and multiplied by twelve months to determine gross annual income. This is generally the case if there are no inconsistencies in income from one month to the next. Typically, lenders will check for inconsistencies (or lack thereof) by reviewing the income recorded on previous tax returns as well as the Year To Date (YTD) for each adult occupant of the household. Once the cumulative gross annual income for all the adult members of the household has been determined, it is then compared with the income limits and household unit size for the specific county where a borrower wishes to purchase a property.

How Is Gross Monthly Income Calculated?

Gross monthly income is essentially the total amount of money earned each month by the borrower, their spouse, and all members of the household aged 18 and above through employment, investments, or business ventures. In simple terms, it is the total monthly revenue that a family expects from several sources. Apart from monthly income from a borrower’s employment or business, extra income may be earned from part-time jobs, overtime bonuses, dividend earnings, self-employment, pensions, royalties, interest, rental income, and VA compensation.

Other sources of income that are considered when calculating household income include child support, alimony payments, sick pay, unemployment compensation, social security benefits, and income from trusts.

Let’s now look at how each of these sources of income is determined or calculated.

• Verification of Employment - A verification of employment (VOE) document may be required to authenticate your family income when no other income or proof of payment is available. It is worth noting, however, that a VOE may not be sufficient enough to validate your household income, so additional documents may be requested by the FHA.

• Income from Salary or Wage - The gross pay from the most recent 4 to 6 week’s pay stubs is summed up and then divided by the number of pay stubs to determine average pay. This is then multiplied by the number of pay periods per year. For instance, if you earn wages on a bi-weekly basis, the gross income is multiplied by 26, while if you are paid bi-monthly, the gross income is multiplied by 24.

• Commission Income - If commission (bonus) income was noted as received but not added on the pay stub then it is added manually. In this case, the average commission income is computed from the supplied pay stubs and then multiplied by the number of pay periods in a year before being added to the wage or salary income.

• Income from Business or Self Employment - To calculate income from business or self-employment, use your quarterly tax returns and financial statements to determine net YTD income and divide the total by the number of months during which it was earned. Multiply the figure by 12 months. It is worth bearing in mind that losses incurred by a business cannot be deducted from another source of income.

• Income from Dividends (Interest) - To compute income from dividends, use current earnings issued by an investment agent or bank to determine YTD interest and divide the figure by the number of months that the dividend earnings represent. Next, multiply by 12 to find the current annual earnings.

  If the statements aren’t accessible, estimate the interest earnings based on the terms of the investment agreement. If neither is accessible, or the financial assets are still invested and maturing, make more accurate estimates using the prior year’s tax returns or earnings statements.

• Alimony / Child Support - When calculating alimony and child support payments in your income tax, use the figure in the divorce decree, separation agreement, or any other supporting documents. If you receive less or more than the stipulated amount, use verifiable figures on bank statements. Multiply the figure by 12 and add the result to your other income sources.

• Pensions - Use the most recent benefit statements provided by a benefits provider such as pensions, social security, and workers’ compensation to find the amount, term, and frequency of payment then multiply the figure by the payment frequency and add it to your other sources of income.

  If the benefit isn’t payable beyond a stipulated verifiable date, compute the total benefits expected through to the end of the benefits term.

• Boarder Income - All income of people above the age of 18 who are expected to live in the house being financed primarily and permanently must be factored into the computation of Current Gross Annual Income.

• Expected Rental Income from 2 – 4 Unit Properties - Rental income from the property being acquired is not included in the income calculation for Program purposes, but it may be processed according to Agency requirements.

  If the applicant or occupier earns money from a rental property, that income must be factored into the income calculation. Use the previous year’s tax returns to figure out any rental revenue, and don’t forget to include depreciation.

2.  First Time Home Buyer Requirement

You must be a first-time homebuyer (FTHB) to be accepted for the FL Housing Loan Bond program. This basically implies you shouldn’t have shown any ownership interest in a primary house in the three years leading up to the execution of the Mortgage Loan. With that being said there are certain provisions that may exempt you from the FTHB requirement. These are:

Veterans Exception

If you are a veteran who served in the active-duty military, navy, or air force and was discharged or released under honorable conditions, you do not need to be a first-time purchaser to qualify for the FL Housing Bond program.

Federally Designated Targeted Area Exception

If you’re planning to buy a home in a federally designated targeted region, you don’t have to be a first-time homebuyer to be considered eligible for the FL Housing Bond program. The federal government recognizes some areas as in need of further development support due to natural disasters or low economic progress. For this reason, borrowers seeking to purchase homes in these regions are not required to be first-time homebuyers to qualify for FL Housing Bond First and Second Mortgages.

There are currently more than 30 counties in Florida that have been classified as federally designated areas. Even if you already own another home but are looking to buy a second home in these areas, you may still be able to receive homeownership assistance through First and Second Mortgage loans.

3.  Purchase Price Limits

This provision sets a limit on the purchase prices agreed upon or the prices of available homes for sale. To put it another way, you can’t utilize the FL Bond First and Second Mortgage loan to pay more than the stipulated maximum amount for various types of property throughout all of Florida’s counties.

The purchase price limits typically vary by county and by location within a county. Purchase price ceilings in targeted areas are generally higher compared to non-targeted areas.

4.  Home Buyer Education

Applicants of the FL Housing First and Second Mortgage loan must complete a Program-approved in-person or online homebuyer education course that meets Housing and Urban Development standards (HUD).

5.  Other Requirements

In addition to the aforementioned requirements, the US Bank and the FHA have additional conditions that a borrower must meet in order to be considered qualified for First and Second Mortgage loans. A minimum FICO score of 640 is required for new loan reservations. Moreover, USDA loan borrowers must have a maximum DTI ratio of 45 percent. Borrowers with a minimum FICO score of 640-679 may have a maximum DTI of 45 percent, while those with a minimum FICO score of 680 or higher may have a maximum DTI of 50 percent.

FL Housing First and Second Mortgage Documents

Various compliance documents are required for FL Housing Bond First and Second Mortgage. These include:

First Mortgage Program Documents

• Seller Affidavit (for HFA Preferred Bond First Mortgage loans)
• Tax-Exempt Rider (required for all Bond First Mortgage loans)
• Mortgagor Affidavit (for HFA Preferred Bond First Mortgage loans)
• US Bank Privacy Form (for FL First and HFA Preferred Bond First Mortgage loans)
• DPA Obligation Letter (for FL First FHA Mortgage loans)
• DPA Borrower Gift Letter (for FL First FHA Mortgage loans)

FL Bond Loan Program Second Mortgage Documents

• FL Assist Second Mortgage Note (for the FL Assist Second Mortgage)
• FL Assist Second Mortgage ( for the FL Assist Second Mortgage)
• FL HLP Second Mortgage Note ( for the FL HLP Second Mortgage)
• FL Assist Second Mortgage (for the FL HLP Second Mortgage)

FL Housing First and Second Mortgage Closing Information

There are a few pieces of documentation you’ll need to deal with before you can close on your new house. The LE/CD (loan estimate/closing disclosure) settlement form is one such document. You will be required to fill out this form before finalizing the purchase of the home.

Lenders are required by FL Housing to furnish loan disclosures generated by their dedicated Loan Origination Software (LOS). The latter is a mortgage software system that keeps track of mortgage transactions from start to finish. This system provides support throughout the mortgage life cycle from the moment of application until the loan is processed and approved.

Another thing to bear in mind is that some documents recorded, transmitted, or executed in Florida are subject to a Documentary stamp tax, which is an excise tax. Mortgages and promissory notes are two common examples. Intangible taxes, on the other hand, are levied on commitments to pay the mortgage and any money related to real estate. It is worth noting, however, that the Documentary Stamp and Intangible Taxes are not applicable to Florida’s First and Second notes and mortgages.

Title Insurance and Power of Attorney

Title insurance is designed to protect home buyers and lenders from financial loss caused by concerns with property ownership, such as flaws in the title. Most homebuyers will get title insurance to protect themselves against a variety of dangers, including erroneous ownership, false paperwork, and inaccurate records. Title insurance is, however, expressly barred with FL Housing Second Mortgages.

The Power of Attorney is another legal option that you need to be aware of when seeking First and Second Mortgage loans This is a valuable but limited legal instrument that allows you (the property owner) to authorize someone else to buy or sell your home on your behalf.

Power of Attorney is permissible under the FL Bond Loan Programs, but only under specified conditions. For example, you must fulfill the standards of the FHA, VA, USDA, or GSE, as well as any US Bank restrictions. Furthermore, active-duty military personnel are required to produce an “Alive and Well” letter. Likewise, lenders should inquire with the closing agents/title firm about the state of Florida’s Power of Attorney (POA) requirements.

Wrapping Up

While purchasing a home in the Sunshine State can be quite challenging given the steep property prices and fierce competition, that doesn’t mean your dream of homeownership is impossible to realize. It just means you need to become more strategic about how to secure home financing.

The good news is that FL Housing’s Bond First and Second Mortgage Programs have made owning a home in Florida easier than ever, particularly for low and medium-income families. Thanks to FL Assist and HFA Preferred First Mortgage products, you can secure down payment and closing assistance that will enable you to purchase a home without having to spend years saving up for exorbitant lumpsum down payments. And the best part is that you can still qualify for home financing assistance even if you are purchasing a second home in a federally designated area and meet all the other minimum eligibility requirements.

Interested in learning about becoming a resident in Florida or moving there? Read more.