FHA loans are an extremely popular Florida mortgage option, and there are a lot of reasons why. Generally speaking, a mortgage loan insured by the Federal Housing Administration (FHA) is one of the easiest types of mortgages to qualify for because it requires a low down payment and your credit doesn’t have to be perfect. If you’re considering an FHA loan, here’s some things you should know.

  • Attractive interest rates. Because the loan is insured by the FHA, lenders typically offer lower interest rates for FHA loans than conventional mortgages. The lenders face less risk so they don’t have to charge as much in interest.
  • Lower minimum credit scores. A perfect FICO (Fair Isaac Corporation) credit score is 850, but very few people have perfect credit. In fact, the Fair Isaac Corp. estimated in 2010, only 0.5 percent of consumers have a perfect score. With an FHA loan, though, you don’t need perfect credit. Borrowers with a score of 600 can qualify for an FHA loan with a low minimum down payment of 3.5 percent of the purchase price. People with credit scores at 580 can still qualify, but will need a down payment of at least 10 percent.
  • Required mortgage insurance premiums (MIPs). These premiums are required for FHA loans. They are charged as an up-front premium of 1.75 percent of the loan, and there is an annual premium that you pay on a monthly basis. The up-front premium can be paid as part of the closing costs or rolled into the mortgage. The annual premium is based on the borrower’s loan-to-value (LTV) ratio, the amount borrowed, and the length of the mortgage.
  • Closing costs may be covered. With an FHA mortgage, lenders, builders, or the seller are allowed to pay some of the closing costs, like appraisals, credit reports, or title expenses.
  • Cash available for home repairs.  The FHA typically requires that a property meets certain standards to qualify for a loan, but it also offers a special loan for people who are buying fixer-uppers. You may be able to finance up to $35,000 for non-structural repairs.
  • Maximum mortgage limits. There are FHA loan limits that vary by state and county. In Florida, for example, limits range from $271,050 for a single-family home to $529,000.
  • Other requirements. Some other typical requirements include a steady employment history (at least two years), at least two years out of bankruptcy with good credit reestablished, and at least three years out of foreclosure with good credit reestablished.

Getting an FHA loan

The FHA doesn’t make loans, it insures them. And only FHA-approved lenders can make FHA loans. So if you’re in the market for a Florida mortgage, you’ll need to find an FHA lender. Remember that different lenders offer different interest rates, costs, and other charges, even on the same FHA loan. It’s worth your time to shop around. If you’re interested in learning more about FHA loans, Embrace Home Loans can help. We’re experts in Florida FHA lending. Please browse the website for more information, or call 407-733-6425.