The Florida FHA loan program has continued to gain popularity for new home buyers across the state. Many homebuyers around Jacksonville, Orange Park, Ponte Vedra, St. Johns need home loan options that offer min down payment like the FHA program. In addition to the low 3.5% down payment requirement, FHA recently announced the monthly mortgage insurance is going down, making the loan more affordable.
Add to this only 3.5% down payment, easy credit qualifying requirements and the backing by the federal government - FHA mortgages are an attractive option to many borrowers in Duval and St. Johns County. Jared Fillmore, FHA loan specialist, says that FHA loans will always fill a big need in the Florida housing market whether their costs rise or fall. Most buyers (especially first time buyers) in Jacksonville can't qualify for a bank conventional loans that require large 10% or 20% down payments.
Here are the advantages of the FHA mortgage for home buyers in Jacksonville:
Easy credit score and down payment requirements
The FHA requirements for credit score and down payments are far lower than for conventional loans. Borrowers can technically qualify for an FHA loan with credit scores of at least 580 credit score and a down payment of just 3.5 percent - according to FHA. However, while FHA-backed mortgage with FICO 580 is "available" to borrowers, many lenders add overlays (additional in house requirements) on these minimum requirements. Loans with the lowest credit scores tend to default at a much higher rate, and lenders are afraid that if they issue too many loans that later fail, HUD will no longer allow them to write FHA-backed mortgages. Therefore, many borrowers will find they need to have credit scores of at least 620 to qualify for the max 96.5% financing.
FHA loan interest rates
FHA loan rates are typically the lowest 30 year fixed rates available and lower than conforming loans. FHA Borrowers with credit scores of 680+ will often qualify for the same interest rate as would conventional borrowers with a score of 720 + would.
FHA closing costs
FHA loans allow sellers to pay up to 6% of the loan amount to cover buyers' closing costs. In conventional loans, sellers can only pay up to 3% in most cases. So this allows the FHA home buyer to put less money into the transaction. I'm some cases a borrower can just pay the down payment, and have the seller pay all closing costs. Most first-time buyers around Jacksonville FL can save enough money for a down payment, but then they have nothing else. So allowing the home seller to pay the tab on closing costs is a big help for many.
FHA mortgage insurance premiums
The biggest downside of FHA loans has long been the costs associated with the upfront and annual mortgage insurance premiums. But since the interest rates on FHA loans are generally lower when compared to conventional, it's often times off sets the additional costs.
The upfront mortgage insurance premium is 1.75 percent of the loan amount. That's $2,625 on a $150,000 mortgage. That cost is added to the principal balance of your loan. So your loan amount is actually $152,625.
However, starting on Jan 26th, the FHA reduced the annual mortgage insurance premium on 30-year fixed-rate FHA loans from 1.35 percent to 0.85 percent of the loan balance. Just to clear up any confusion, the annual mortgage insurance is actually the monthly insurance (PMI) that is added to each monthly payment. This is the monthly PMI rate, not the one time funding fee of 1.75%. The new mortgage insurance reduction is a real big savings. On a $200,000 loan, the annual premium of 1.35 percent would cost borrowers $2,700. But with a premium of 0.85 percent, borrowers will only pay $1,700 for the same loan amount.
The reduced annual rate does not apply to those borrowers who are taking out 15 year fixed mortgage terms, these will remain the same.
Safe Government Backing
FHA loans are backed by the US government - Federal Housing Administration. The program offers safe secure fixed rate terms with no pre payment ( early pay off) penalties.
Five Stars is Florida's leading mortgage resource. Serving all of NE Florida including Duval, Clay, St. Johns and Nassau county 7 days a week - contact us today with any questions or to get pre qualified. Visit www.FiveStarsMortgage.com or call ph: 800-871-2636.
Serving - Duval Jacksonville FL, Orange Park FL, Middleburg FL, Callahan, Nassau, Jacksonville Beach, St. Johns, Julington Creek, Ponte Vedra.
Many locations in St. Johns and Nassau county are USDA approved! Be sure to learn more about the USDA mortgage here.