Miami home buyers have been using Florida mortgages to become a homeowner for a long time. FHA Loans Miami are backed by the Federal Housing Administration (FHA). To qualify for an FHA loan, you need to use an FHA-approved lender, bank, or broker in Florida. Make your dream of owning a home come true by getting an FHA loan.
So What Is An FHA Loan?
To proceed with this guide, you need to first understand what an FHA loan is. It is simply a mortgage that is insured by the FHA and has minimum 3.5 percent down payment requirement for borrowers that have a credit score of at least 580 or more. FHA loans are extremely popular among home buyers in Miami who are in the market for the very first time and face credit challenges or lack savings. Since the FHA insures the mortgages issued by nonbanks, credit unions, and banks, the insurance helps protect the lenders in case of a default. Hence, FHA lenders are able to provide borrowers with favorable terms that might not normally qualify for.
The FHA home loan can only be used for buying or refinancing single-family houses to four-unit multifamily houses as well as condominiums and mobile homes. There are certain types of FHA loans that may be used for renovating an existing house or constructing a new one.
What Is The FHA?
The Federal Housing Administration or FHA for short is part of the United States Department of Housing & Urban Development. It has been around since 1965. However, FHA started out 30 years before that as it consisted in the New Deal. Besides the Dust Bowl drought, and stock market crash, the Great Depression caused the housing market bubble to burst. In 1933, about half of the homeowners in the United States defaulted on their mortgage. This led to the National Housing Act, 1934 coming into effect. It created the FHA to provide assistance to those hoping to become a homeowner. Thus, the 20 percent down payment requirements become the norm and it insured mortgages for as much as 80 percent of the home’s value. Before this period, homeowners needed to make a down payment of 50 to 60 percent.
What Makes FHA Loans Different From Conventional Loans?
The main difference between an FHA loan and a conventional loan is that it is a lot easier for homebuyers to qualify for an FHA loan. Besides, conventional loans are not guaranteed or insured by the federal government. In addition to this, FHA loans can be obtained by homebuyers that have a much lower credit score than is required by a conventional loan.
Guidelines for FHA Loans in Miami, Fl
To get an FHA loan, it is important to know the guidelines. These are mentioned below.
- An FHA loan can be obtained for condos, townhomes, and single-family homes. But, the condos need to be listed on the Condo Approval List. The home seller could be anyone, a private seller, investor, or even a bank.
- The loan is only available for the primary residence of the borrower. This means that vacations homes and investments are simply not allowed. Thus, all of the homes have to be occupied by the owner and his or her family.
- As mentioned above, the FHA home loan in Miami requires a 3.5 percent down payment. Borrowers may also choose to put down some more money. But, more than 5 percent would generally lead to a conventional loan.
- The maximum amount of cash out for an FHA Refinance is about 85 percent.
- There is no prepayment penalty on the loan. It is up to you when you want to pay down or off the mortgage without incurring a penalty.
- The loan has mortgage insurance but is not re-underwritten unlike conventional loans.
What Is the Waiting Period For Borrowers That Have Previously Declared Bankruptcy?
A great thing about FHA loans is that previous bankruptcy does not disqualify you from seeking a loan. You need to prove a minimum of 2 years of discharge since chapter 7 bankruptcy. Borrowers that have less than 2 years of discharge, they may qualify for financing if they meet the extenuating circumstances.
How Are Collection Accounts For Installment Loan And Credit Card Treated By The FHA?
As for non-medical collection accounts, once the cumulative outstanding balance exceeds $2,000, the borrower may purpose the debt-to-income ratio or pay-off the balance and provide evidence of the payment plan.
Could You Still Receive An FHA Loan For Having A Tax Lien?
A borrower that has delinquent tax debt would be ineligible for the FHA loan unless the borrower has a repayment plan. The repayment plan tax liens do not need to be fully paid if the documentation provided proves that the borrower has a valid repayment plan in place. The following would be required.
- The borrower should have already made at least 3 months of scheduled payments and prove such payments through proper documentation.
- The payment has to be included in the debt-to-income calculation.
- The borrower is unable to prepay the payments for meeting the 3-months payment requirement.
Which Property Types Are Eligible For An FHA Loan?
Although the property types that are eligible for an FHA loan have already been discussed, it is important to go into more detail. The property types are mentioned below.
- Factory built homes that have not been built on a permanent chassis; permanently affixed on to the foundation; built on-site; have to meet the local building code requirements. The property is classified as real property and has a permanent connection to a waste disposal system, electrical system, and water supply.
- Condominium that is on the FHA approved list of condominiums.
- 2 to 3 unit planned development.
- Single-family residences.
- Pre-fabricated/ modular properties (single-units only).
Once you have gone over this guide to FHA loans in Miami, you will have a better idea of whether you qualify or not and for which property type can you obtain the loan.