Getting a Florida Mortgage is not much different from getting a mortgage in any other state. There may be, however, some specific requirements that you will need to meet, depending on the Florida county your house will reside in as well as the Florida mortgage lender you choose to work with.
In this article, we’ll help you understand the details of preparing and applying for a home mortgage and discuss the key information that lenders look for to determine a borrower’s eligibility.
We’ll also review some common terms, fees often seen from a mortgage lender, loan programs and other considerations to be made when shopping for home loans in the sunshine state.
What to consider before taking out a mortgage
There are a few things you should take into account before applying for a mortgage in Florida:
Your credit score
To be eligible for a mortgage, you will need a minimum credit score of at least 500, although a lower score may severely limit your loan options. A credit score is a numerical representation of your creditworthiness.
The higher your credit score, the lower the interest rate you will be offered on your mortgage. Conversely, a lower credit score will typically result in a higher interest rate and thus, a higher monthly payment for your loan.
Your down payment
You will need to have saved up a certain amount of money for your down payment. The standard down payment is 20% of the purchase price of the home, but some programs allow for less, such as 3% or 5%.
Keep in mind that if you put down less than 20% of your purchase price, most lenders will require that you pay PMI – which means that your monthly payment will be higher.
Your income & employment history
Lenders will want to see that you have a steady income and a good employment history. They will also want to know what your monthly debts are to calculate your debt-to-income ratio, which is a key factor in determining mortgage affordability.
Your goal: buying a home; refinancing a mortgage or home equity loans
The goal of your real estate financing will help determine your loan options and will impact which Florida mortgage lender you ultimately work with.
From a mortgage perspective, home loans have different requirements, documents, and fees when compared to other real estate loans such as mortgage refinancing, home equity loans, adjustable rate mortgages, renovation loans and others.
Types of mortgage loans available from a Florida Mortgage Lender
There are many different types of mortgage loans available to homebuyers in Florida, each with its own set of terms and conditions. What’s more, each loan type may have varying qualification requirements for home loans and home equity lines.
While there are dozens of loan products available for the home buyer, the four most common types of loans mortgage lenders will offer home buyers include the following:
Conventional Loans
A conventional mortgage is a home loan that’s not insured by the federal government. Known to be the most common loan type in the US, there are only two types of conventional loans that most Florida mortgage lenders offer – conforming and non-conforming loans.
A conforming loan is a type of mortgage that is within the size limits of Fannie Mae or Freddie Mac, government-sponsored enterprises (GSEs) that purchase mortgages from lenders. Any mortgage that exceeds these size limits is known as a non-conforming mortgage or jumbo loan.
FHA Loans
An FHA loan is a government-backed mortgage issued by an approved lender – but which is also guaranteed against default by the Federal Housing Administration (FHA), which is controlled mostly by the U.S. Department of Housing and Urban Development (HUD).
The FHA via HUD protects the lender if you default on your mortgage payments and helps make mortgage approval possible for homebuyers who might not otherwise qualify.
Note that if you obtain an FHA loan, additional fees will be required as part of your down payment and monthly payment, to protect the government from the default of the loan.
VA Loans
A VA loan is a mortgage loan available through the U.S. Department of Veterans Affairs (VA) to assist active military members, veterans, and eligible surviving spouses acquire homes.
The Department of Veterans Affairs does not actually lend money; instead, it guarantees a portion of the loan, allowing approved lenders to provide financing to eligible borrowers at favorable rates and terms.
These types of loans are some of the most sought-after from Florida mortgage lenders as they consistently have the lowest down payment requirements coupled with the best mortgage rate available.
USDA Loans
The U.S. Department of Agriculture (USDA) offers these loan types with very favorable terms for rural homeowners in designated USDA areas across the country. USDA mortgage loans are often known as “rural development” or “RD” loans, and are only available in certain rural areas as designated by the USDA.
As a result, a USDA loan is unique in that both the borrower AND the intended purchasing property need to meet certain qualifications to be eligible.
Jumbo Loans
A Florida mortgage that is considered a jumbo loan is any mortgage loan that exceeds the loan limits for conforming loans and which were set by the Federal Housing Finance Agency (FHFA) – a regulating body for mortgage lending in the U.S.
The FHFA sets a maximum loan limit for each county, and loans above this amount are considered jumbo loans. With a Florida mortgage in most counties, the jumbo loan limit is typically any home loan that is over $647,200, except for Monroe County where the loan limit is higher at $710,700.
Understanding Down Payment, Fees, and Income Requirements
When discussing mortgages, it’s important that you have a firm grasp on the requirements for the down payment, the potential and actual fees and how the income requirements for the particular type of loan you are applying for.
Mortgage Down Payment
The down payment for a mortgage is calculated as a percentage of the sales price for a particular piece of real estate or investment portfolio. Depending on the loan type, credit score, property and lender you work with, the amount of money you need to put down on a property will vary.
When discussing conventional mortgages for home loans, the national average for the preferred down payment for a mortgage is at least 20% of the sales price of the home, as this will ensure that borrowers do not need to pay PMI.
However, other loan options do allow home buyers to pay for reduced down payments – which are especially attractive for first time homebuyers and borrowers need some form of closing cost assistance.
For instance, FHA loans (one of the government backed loans offered by the Federal Housing Administration) only require the borrower to have a minimum down payment on their Florida mortgage of only 3.5%.
Borrowers seeking conventional loans may search for Florida mortgage lenders or a direct lender / financial institution that provides special programs for first time homebuyers. Some of these loans for first time homebuyers only require a down payment of as little as 3% of the purchase amount.
And still, other loan products offer a guaranteed rate with $0 required in down payments. These would be your VA loans and USDA loans, which are also government backed loans designed to provide borrowers with loans that have competitive interest rates AND save money with no down payment requirement.
Do keep in mind that the types of loan programs that have lower down payment options will typically have a higher mortgage rate and possibly additional lender fees associated with them.
What’s more, in the case of conventional mortgages with a down payment of less than 20% and ALL FHA loans, the home buyer will have higher monthly mortgage payments as there will be a PMI fee added to the monthly payment.
Mortgage Fees
When you’re saving up for a down payment for a Florida mortgage, in addition to the purchase price of the home, you’ll need to factor in closing costs that can range from 2% – 5% of the purchase.
Closing costs are fees charged by the mortgage lender or underwriter, the mortgage broker, any third-party settlement companies used (such as appraisers and title companies), and of course – any governing entities such as the state, county, and HOA (homeowner association). As of 2022, these fees will be broken down into various sections on your loan estimates and closing statements.
While a complete readout of a loan estimate is beyond the scope of this article, some of the more common fees you should be aware of include:
- Appraisal Fees (to determine the valuation of the property you want a mortgage for)
- Credit Report Fees (to run your credit and determine eligibility)
- Origination Fees / Points (fees paid to a lender to review, approve, originate and process the loan)
- Title Insurance (insurance received for the property that protects the new buyer from any potential title transfer issues)
- Recording Fees and Taxes (fees that the county, local and state governments charge to transfer the loan or property to a new party)
- Underwriting Fees (fees that the lender charges to underwrite and process the loan)
- Prepaids and Escrow (Fees that are prepaid at the time of closing to cover property taxes and homeowner insurance obligations the mortgage lender requires to obtain the home loan)
Click here to review a sample 2022 loan estimate to learn how fees are outlined.
Income Requirements for a Florida Mortgage
As with any mortgage application, Florida mortgage lenders will closely scrutinize your financial history and income to determine whether or not you are a good candidate for a loan. While each mortgage lender is different the best Florida mortgage lenders will review key pieces of information from your application to help advise you on ideal loan programs for your situation.
Some of the income data reviewed include:
- Your employment history and current income (most lenders want previous 2 years of stable income)
- Your monthly debts and expenses (including credit card debt, car payments, student loans, alimony, etc.)
- Your credit score and credit history (most lenders want limited late payments and no recent bankruptcies or foreclosures)
- The amount of your down payment (This affects your total loan amount and monthly payment)
Generally speaking, most lenders will want to see that you have been employed in the same field for at least 2 years before they will consider approving your mortgage application.
They will also closely examine your monthly income and debts to determine what kind of mortgage payment you can realistically afford. With these figures along with the estimated monthly payment for your mortgage, the broker will be able to calculate your debt-to-income ratio to obtain a Florida mortgage.
As a general rule of thumb, most lenders recommend that your monthly mortgage payment not exceed 28% of your gross monthly income. However, other loan programs do allow borrowers to get a Florida mortgage with a DTI ratio as high as 55% (such as a VA loan or direct hard money loans).
What’s more, if you work with one of the best mortgage lenders in Florida (such as The Wholesale Mortgage Firm), they may have partnerships with an online lender or other lenders that allow for manual underwriting of loans with even higher DTI limits.
If you are over the DTI ratio for a qualified loan, your other options are to put more of a down payment on the home or pay off some of your liabilities at or before closing to reduce the DTI ratio to acceptable levels for the lender.
Although your down payment may be greater, the benefit of this strategy is that your overall total monthly payment may be lower. A knowledgeable Florida mortgage lender should be able to help advise you on a path forward.
Click here to get a free analysis of your income to determine your maximum loan amount.
Use the Best Florida Mortgage Lenders to Get Great Rates
There are many mortgage lenders available in Florida to choose from, so it’s important to compare your options and select the best one for your needs. Our recommendation is to choose a Florida mortgage lender as they are usually more familiar with the local real estate and Florida fees.
That says, when selecting a Florida mortgage lender, there are a few things you should take into account when narrowing down your choices:
The type of mortgage loan you need:
Some lenders only specialize in specific types of loans such as Conventional Loans, VA loans or FHA loans. Be sure that the mortgage lender you select can offer you a variety of loan products outside of these key three that you can also compare.
The interest rate and fees being offered:
The interest rate is one of the more important items to be considered when evaluating a mortgage lender – but it’s not the only thing. A great Florida mortgage lender will not only be able to advise you on today’s mortgage rates but also on strategies on how to get lower rates and / or lower your overall monthly payment.
The communication received from the mortgage lender:
Ask any real estate agent and they’ll tell you that it is imperative that your choice of mortgage lender openly communicates the process, needs, status, and potential hiccups of your loan with a sense of urgency.
Keep in mind that aside from you as the home buyer, the mortgage lender will need to communicate with 5-7 different parties effectively to get your loan closed for you on time.
This is just as important as obtaining a great rate as it will do you no good to have a mortgage rate for a loan that cannot close because the mortgage lender didn’t communicate.
Lack of communication from a mortgage lender is one of the primary reasons a loan will be delayed or fall apart at the last minute.
The relative experience of the mortgage lender:
When you start searching for a Florida mortgage lender to work with, you should look for a person, team, or company who has experience in originating loans in Florida.
To be clear – I’m not talking about the number of years of experience they have – but rather the number of loans they have closed and their knowledge of the industry as a whole.
In other words, I’d recommend a mortgage lender who has closed 40 loans in the last 2 years over a lender who has closed 30 loans over the last 5 years. The originator with 40 closings has seen more, worked with more buyers, and has a greater experience in the market than that of the more tenured mortgage lender.
Applying for a Florida Mortgage
Once you’ve selected a mortgage lender, you’ll need to begin the mortgage application process. This typically involves completing a mortgage application and providing the mortgage lender with supporting documentation, such as proof of income and employment, bank statements, tax returns, and more.
It’s very important that borrowers are honest, straightforward, and provide the specific information requested on the Florida mortgage application. Make sure your dates, numbers and timeframe are all accurate in your application.
This is because the mortgage lender will use this information to determine your eligibility for a loan and also help identify what loan options, which loan term, upfront costs, closing costs, tax credits, lender fees, and any potential closing cost assistance they can offer you.
Additional Florida Mortgage Resources
Common Payment Assistance Programs in Florida
This article discusses some common payment assistance programs that may be available to home buyers from the sunshine state or a direct lender.
Home Equity Lines Vs. Mortgage Refinancing
This article covers the general difference between a home equity line compared to refinancing a mortgage on the current property. We dive in the pros and cons of each scenario.
Evaluating Lender Offers
This article provides a guide on how to evaluate competing offers and mortgage rates from a mortgage lender or a direct lender / home builder.
Understanding Mortgage Insurance
This article explains the concept of private mortgage insurance (PMI) and details when, how and why it is applied on home loans.
What is an FHA (Federal Housing Administration) Loan
This article highlights the FHA program for home loans and delves into the unique characteristics of an FHA loan and how it compares to other loan products.
How Credit Scores and History Affect Home Loans
This article discusses how a home buyer's credit score and their credit history will impact their ability to get a home loan and influence the overall mortgage rates and lender offers they may receive from a Florida mortgage lender.
