The Federal Housing Administration has backed mortgage loans since the 1930s, offering lenders mortgage insurance in exchange for their writing loans that usually have lower interest rates than more conventional loans. For those Florida home buyers interested in getting a FHA loan, there are guidelines that must be met to be eligible for the loan. These guidelines include restrictions on debt, income, down payment and credit score.
FHA Debt To Income
If you apply for an FHA loan, your debt-to-income ratio must conform to FHA guidelines in two ways. First, your mortgage payment can be no more than 29 percent of your gross monthly income. In this formula, your mortgage payment includes the principal, interest, escrow payments for taxes and insurance, mortgage insurance and any homeowners’ association fees. Second, your new mortgage payment and your recurring monthly debt can be no more than 41 percent of your gross monthly income. Recurring monthly debt includes car payments, other installment loans and credit card payments. Now, it’s important to note this is the “standard” but not really the “rule” Applicants that have strong compensating factors like high credit score, savings, good job history, etc, can frequently exceed the FHA debt to income ratio limits.
FHA Down Payment:
The down payment you’ll have to put down depends on your credit score, according to a new FHA guideline passed in 2010. If you have a credit score of at least 600, you can qualify for FHA program’s best down payment program, which is 3.5 percent of the purchase price of the home. FHA takes into account other aspects of your credit and payment history when determining whether it will guarantee your loan, but you must have that credit score to be eligible for the lower down payment.
Mortgage Insurance (PMI):
Part of the reason lenders are willing to work with FHA is because of FHA mortgage insurance, which pays the lenders in case you default. You pay the mortgage insurance as part of your loan agreement if your down payment is less than 20 percent of the home cost.
Currently, FHA monthly mortgage insurance is .85% for 96.5% max financing. Please see the MI chart here.
Florida FHA Loan Amount Limits:
There are guidelines that limit the amount for loans guaranteed by FHA. But these limits vary by state and by each county in each state, based on standard of living. As a result, your loan cannot exceed your county’s preset limit. HUD and FHA have a searchable database that allows you to find out the limit before you apply. Please click the FHA details page here to look up the FHA loan amount limits in Florida.
FHA Mortgage Source is Florida’s leading FHA loan resource. Please call us at ph: 800-743-7556