FHA Loan Requirements in Florida

Becoming a homeowner can seem like a far-fetched dream for many young Americans. Saving up enough for a down payment is in itself a struggle. What choices do you have when you don’t have 20% to put down on a home? And with soaring home prices and rising interest rates, how can one afford a mortgage? 

Fortunately, those with difficulty saving for a down payment or less than stellar credit may qualify for an FHA loan. Read on to learn about FHA loan requirements in Florida and how to get a Florida FHA loan from the experts at The Associates Home Loan of Florida, Inc. 

What Is an FHA Loan? 

In 1934, Congress created the Federal Housing Administration (FHA) to help more Americans afford homeownership. However, at the time, buyers needed to put down a 50% down payment and then faced impossible loan terms that most could never repay. 

The purpose of the FHA was to reduce lenders’ risk and make it easier for Americans to get home loans. Thus, the FHA insures or guarantees all FHA home loan programs. This means if you default on your loan payment, the federal government will pay your mortgage lender. 

Although most common with first-time homebuyers, several types of FHA loans exist. Examples include the FHA 203K Improvement Loan to finance fixer-uppers. Refinancing is also possible with the FHA Simple Refinance. This is for those that want to replace an existing FHA loan with a new fixed- or adjustable-rate loan. 

The loan amount you can receive depends on the FHA loan limits for your county. For most Florida counties, the limit is $420,680. However, this may go up to $970,800, depending on your location. 

FHA Home Loan Interest Rates 

Some FHA loans have lower interest rates than conventional loans, but some FHA mortgage rates are higher. Several factors affect interest rates, such as: 

• Credit score 
• Down payment size 
• Home price and loan amount 
• Interest rate type 
• Loan terms 
• Location 

What Are the FHA Loan Requirements? 

Borrowers must meet several FHA requirements in Florida to be eligible for an FHA loan. 

First, you must purchase a primary residence. Most use an FHA mortgage loan to buy a single-family home. This includes condos, townhomes, and manufactured homes on a permanent foundation. You can also use an FHA loan for a multifamily home. The home can have up to four units, and you must live in one of them. 

Let’s take a look at some of the other requirements. 

FHA Credit Score Requirement 

You need a minimum credit score of 580 to qualify for an FHA loan. (Comparatively, the minimum credit score for a conventional loan is usually 620.) This doesn’t disqualify those with lower credit scores, though. 

You can still apply for an FHA loan if your FICO score is between 500 and 579. You’ll just need to put down a bigger down payment.  

If you don’t know your credit score, you can run a free credit report on yourself to find out before exploring mortgage options. 

Additionally, you may still be eligible for an FHA loan if you have a poor credit score because of a previous bankruptcy filing or foreclosure. 

Income Requirements for FHA Loans in Florida 

Income eligibility for FHA loans is very different from conventional loans. This is because there is no minimum monthly income required and no maximum salary that will disqualify borrowers. 

However, you must show you have a sufficient, steady income. When obtaining a mortgage, lenders want to see that you can realistically afford the house you wish to purchase.  

FHA Down Payment Requirement 

Comparing conventional vs. FHA loan down payment requirements, FHA loans require a much lower payment. 

The minimum down payment for those with a credit score of 580 or higher is 3.5%. Those with a score of 500 to 579 will need to put down 10%. 

Some conventional loans will accept a 10% down payment, but you’ll likely have a higher interest rate. Most conventional mortgages require a 20% down payment. 

The FHA loan’s low down payment of 3.5% is much more affordable to many first-time homebuyers. 

If you still cannot afford a 3.5% down payment, there are down payment assistance programs to help. The U.S. Department of Housing and Urban Development (HUD) gives housing grants to state governments and select municipalities to assist with housing costs. 

Remember that in addition to the down payment, you must prepare to pay closing costs or the expenses necessary to complete the real estate transaction. These include: 

• Appraisal 
• Document preparation 
• Home inspection 
• Homeowner’s insurance 
• Lender’s origination fee 
• Property survey 
• Title search and insurance 
• Underwriting fee 
• Upfront mortgage insurance premium (MIP)

The total closing costs are usually between 2.05% and 2.75% of the home’s purchase price. 

FHA Debt-to-Income Ratio Guideline 

FHA loan qualifications in Florida require borrowers to have a debt-to-income ratio (DTI ratio) below 50%, though some lenders will allow a DTI ratio of up to 57%. 

This means the net income you spend on monthly debt payments doesn’t exceed 50% of your monthly income. Examples of these monthly payments include: 

• Car payments 
• Credit card payments 
• Mortgage payments (or rent) 
• Student loans 

FHA Required Documents 

The FHA loan application in Florida requires the following documents when applying: 

• At least two established credit accounts (without delinquent debt, judgments, or past FHA-insured mortgage debts) 
• Government ID and Social Security number 
• Two years of pay stubs, W-2s, or tax returns 

Once you have the documents, you can complete the pre-approval process with Associates Home Loan. Getting pre-approved makes it much easier to buy a home because you can show the seller you already have the funds. 

Let Us Help You Secure Your FHA Loan 

If you’re ready to move into your dream home, apply now with Associates Home Loan to get pre-approved for your FHA loan and secure the funding you need to finally become a homeowner. 

At the Associates Home Loan of Florida, Inc., we streamline the loan application process to make it simple and stress-free. We work with borrowers from all backgrounds, including nontraditional ones, to find the right loan for you so you can make homeownership a reality!