If you’re planning to buy a home in the near future, you may be wondering about the different types of mortgage loans available and whether you will qualify for one. Florida FHA loans are some of the easiest loans to qualify for because of their low credit score requirements and smaller down payment options.
In this article, we’ll discuss what FHA loans are and what you’ll need to qualify for one.
An FHA loan is backed by the Federal Housing Administration (FHA). This type of loan has set standards that must be met in order to qualify. However, for Florida first-time home buyers and those with less than perfect credit, an FHA loan may be easier to obtain than a traditional mortgage.
To obtain an FHA loan, you’ll need to meet certain requirements. A few of these include:
There are other requirements as well, which we’ll discuss in detail below.
FHA loans are often attractive to individuals who have poor credit or are new home buyers because these loans don’t have the stringent requirements that traditional mortgages do.
Home buyers with a credit score of at least 580 and a down payment of at least 3.5% of the purchase price will generally qualify, provided they meet all of the other requirements.
If your credit score isn’t 580 or more, you may still qualify for an FHA loan if you have a down payment equal to 10% of the purchase price and a credit score of 500.
The debt-to-income (DTI) ratio measures the percentage of your pre-tax income that you spend on monthly debt, such as credit cards, student loans, or other obligations. The FHA requirements for obtaining a mortgage vary, but those who have a DTI lower than 50% will generally meet the conditions for the loan.
Another requirement to obtain a mortgage is the payment to income (PTI) ratio. This is the percentage of your income that would go to your proposed mortgage payment. The maximum PTI that you may have is 40%, but that will vary according to other factors, such as your DTI and down payment amount.
The income requirements for your loan will vary according to your PTI and other factors. However, in addition to qualifying under the PTI ratio, you will need to show two established credit accounts, such as two credit cards or a car loan. You must not have any delinquent federal debts or judgments or owe any debt on past FHA mortgages.
The FHA sets maximum loan amounts by county within the United States. These will vary by the cost of living in the location where the home is purchased. For example, locations like Hawaii and California, which have high costs of living, will have higher loan limits.
A general guideline is that loan limits are $420,860 for single-family homes in lower-cost areas and $970,800 in higher-cost areas.
While these are the main financial requirements to initially qualify for an FHA loan, there are non-financial requirements associated with obtaining an FHA loan.
For example, the property must be a principal residence, and it must pass an appraisal. You will also need to purchase FHA mortgage insurance at closing, which is equal to 1.75% of the purchase price of the home. Mortgage insurance will also be a part of your monthly mortgage payments.
Disclaimer: The opinions expressed above are meant for illustrative purposes only. For specific questions about mortgages or your lending needs, please contact Arco Financial. www.arcofinancial.com. Some restrictions apply. NMLS # 2149692