Every home buyer is different from their credit scores, income, and employment. Therefore, each borrower requires a different kind of mortgage to help them purchase a Florida home.
The good news is, there are a variety of mortgage products and programs offered that have their own unique features. Let’s review some common Florida mortgage programs below for home buyers.
Summary of Florida Home Loan Programs
Becoming familiar with the different characteristics of loan programs is helpful in picking which loan option is best for you.
• Conventional loans
• 30-year fixed-rate mortgages
• FHA loans
• VA loans
In contrast to FHA loans, the federal government does not guarantee conventional mortgage loans the private sector does instead. Borrowers who secure financing with a conventional mortgage and depending on the down payment amount they make may or may not have to pay mortgage insurance.
Borrowers who put down 20-percent or more of the home’s purchase price will not need to pay mortgage insurance. Home buyers who come in with less than a 20% down payment may required to pay for mortgage insurance unless they can secure financing using second mortgage or piggyback HELOC.
30-Year Fixed-Rate Home Loans
The 30-year fixed-rate mortgage home loan is attractive to many Florida borrowers because the monthly mortgage payment are manageable for borrowers. This is due to the interest rate staying the same throughout the mortgage term of thirty years.
15-Year Fixed-Rate Mortgages
Just like the 30-year fixed-rate mortgages, a 15-year fixed rate home loan has interest rates that are fixed for the duration of the mortgage term.
Borrowers will have much higher monthly payments than a 30-year mortgage because it is amortized over 15 years. The benefit is your mortgage will be gone faster and you save tens of thousands of dollars over the 15-year life of the loan.
Fixed-Rate Pick Your Term Mortgages
If you feel the 15-year is too high of a payment and the 30-year is too low, some lenders allow for qualified borrowers to pick your loan term between 8 years and 30 years. So, you can get a 13 year loan, 20 years, 23 years, 27 years, and so on.
Perhaps among the most popular mortgage programs available to borrowers is the FHA loan. The Federal Housing Administration insures these home loan programs and makes it simpler for many prospective homebuyers to achieve their goals of becoming a homeowner.
The lending criteria to get an FHA loan is less strict in comparison to other mortgage products. It is for this reason why this home loan is really popular with first-time home buyers.
To begin with, FHA’s required minimum credit score is much less than what is required to get a conventional loan. Basically, applicants with a 500 credit score may become approved for an FHA loan if they also have a 10 percent down payment. However if you have a credit score of 580, you may bring in the minimum down payment of 3.5-percent.
Keep in mind that local banks usually have overlay rules which require you to have a 640 or 660 credit score. Mortgage companies and brokers are the sources to go that offer loans to everyone from 500+ credit scores to those with 800. As a result, it may be less difficult for borrowers to gather enough money to apply for a mortgage to buy a home in Florida.
Borrowers should understand if they get an FHA loan they will be required to pay mortgage insurance. This can raise the monthly mortgage payment a bit. For clarity, there are two insurance premiums that are needed for most borrowers who get an FHA loan in Florida:
• Upfront mortgage insurance premium (MIP), with a cost of 1.75% of the mortgage amount.
• Annual MIP, which is usually around 0.85% of the loan amount.
Despite the fact mortgage insurance premiums need to be paid on FHA loans, the benefits exceed the costs for most borrowers who secure this loan in cities such as Orlando, Tampa, Miami or Naples – Fort Myers.
Like FHA loans, VA loans are insured by the government. These loans are provided to eligible and qualified veterans and members of the military. This is a great zero down loan option that does not require mortgage insurance and currently has no set loan limits if you qualify and the lender has no overlays.
Loan limits for Conventional and FHA loans are based on the county in which the borrower(s) are buying their home. When you need a loan amount above these limits, the loan is regarded as a “jumbo loan.”
Jumbo loans with only ten percent down up to $1.4 million are available for homes in Florida’s coastal areas and high-end gated communities.
In Florida, the conforming loan limit for 2020 in most counties is $510,400, and the FHA loan limit for this year ranges from $331,760 to $510,400 for single family homes, condos, or townhouses, according to the county.
Hybrid Fixed Adjustable-Rate Mortgages (ARMs)
With an adjustable-rate mortgage (ARM) the interest rate changes during the term of the mortgage unlike a fixed-rate mortgage. However, the hybrid ARM does have aspects of both fixed-rate and adjustable-rate mortgages.
The interest rate stays fixed for 3, 5, 7 or 10-years and adjusts at different intervals such as every six months or every year after the initial fixed period. Florida home buyers who are preparing to move out of their home prior to the fixed period ending or are financially secure with the risk of rates increasing may find these hybrid ARMs an excellent way to save a little money in interest paid in the long run. However, the rate different is only .25-.375% range if choosing a 3-year or 5-year ARM.
Apply For a Mortgage Loan in Florida
If you are thinking about buying a home in Florida in 2020, then you’ll want to work with a licensed mortgage originator to get the best loan for you. A large mortgage company or broker is able to offer many loan programs for borrowers in California, Colorado, and Texas. Contact us to apply for a mortgage or get your mortgage questions answered.