Florida Conventional Mortgage Programs & Requirements

A conventional mortgage is a private-sector loan that isn’t backed by the federal government and follows the guidelines set by Fannie Mae and Freddie Mac (more on them in the next section). Conventional mortgages are the most common type of loan and account for 60% of all mortgage applications.

Any conventional mortgage that adheres to the financing limits set by the Federal Housing Financing Authority (FHFA) is considered a conforming loan.

Non-conforming loans — also known as jumbo loans — exceed the FHFA’s conventional mortgage financing limits. This can be a good option for home buyers who have their hearts set on a larger home and have the means to pay a little more up front. However, non-conforming loans usually carry higher interest rates than conforming loans, as well as higher down payments.

Before we explore the specifics of conventional mortgage loans in Florida, let’s define some key terms you’ll encounter in this post.

AMI: Area median income. This refers to the average income of a geographically defined area and usually informs how much a borrower can earn before they can no longer qualify for a home loan.

Credit score: A number determined by an individual’s historical ability to pay their debts, with 300 being the lowest (poorest) score, and 850 being the highest. Lenders use this number to determine an applicant’s eligibility to take out a loan. A “good” credit score is considered anything starting in the mid-600s and up.

DTI: Debt-to-income ratio. This percentage compares how much you earn to how much you owe in rent, mortgage payments, students loans, and other debts. The standard maximum DTI most conventional mortgage lenders will accept is 43%, although there are exceptions.

Fannie Mae and Freddie Mac: These two lending entities were created by Congress in 1938 during the Great Depression in order to “provide liquidity, stability and affordability to the mortgage market.” Most conventional mortgage loans are furnished by one of the two.

Loan limit: A cap placed on loan amounts nationwide, or in specific areas, as determined by the FHFA. This is usually determined by the property values in a certain county; for example, counties with higher property values will place higher caps on their loan amounts to accommodate higher home prices.

PMI: Private mortgage insurance paid by the borrower. This is a policy that protects the lender if a loan applicant is providing less than 20% for their down payment. This generally costs between 0.5% and 1% of the entire loan annually; rates vary depending on the borrower’s credit rating.

If you have any questions about conventional mortgage programs in Florida or which loan is right for you, contact us today. We would love to help you find the best option for you.

When you’re weighing your mortgage loan options, you need to consider whether saving money in the short or long term is more important to you. An FHA or VA loan allows borrowers to put as little as 0%–3% down up front, while the standard down payment for conventional loans is 20% (with exceptions — see below).

However, non-government-backed loans generally have lower loan limits than a conventional loan. The national loan cap for an FHA loan is $356,362. As of early 2021, the maximum conventional conforming loan limit for most of Florida was $548,250 — nearly $200,000 more than the national limit! The one exception in Florida is in Monroe County, where the loan limit is $608,350.

This chart will give you a clear-cut comparison between the different types of mortgage loans available nationwide:

As mentioned above, conventional loans often require a down payment of 20%. However, there are several options available in Florida that require far less.

There are also loan programs available exclusively to Florida home buyers:

First Time Home Buyer Loan: This loan allows first time home buyers to take out loans up to $484,350 with only a 3% down payment (which can be gifted from a relative). Borrowers can qualify with up to 50% DTI.

Florida Condo Loan: This type of loan allows first time home buyers to put down 3% on condos that meet conventional loan requirements (warrantable condos). Non-first time home buyers can put down as little as 5%.

The Florida Assist & Florida Homeownership Loan Program: These two down payment assistance (DAP) loans provide up to $7,500 and $10,000, respectively, and are considered second mortgages.

Now that you’re familiar with the specifics of conventional mortgage loans in Florida, it’s time to weigh the pros and cons.

When meeting with your loan officer to discuss conventional loan options in Florida, make sure you’re prepared to cover the following:

• Credit Score: The minimum credit score to qualify for a conventional mortgage ranges from 620 to 640, depending on the lender.
• Documentation: Borrowers applying for a conventional mortgage will need to provide documentation detailing their income and assets, among other things. See the next section for a complete list.
• Income & Assets: Lenders will use the documents you provide (specifically bank and investment account statements) to verify that you have sufficient means to cover both the down payment and associated closing costs.
• Minimum Down Payment: Typically, conventional mortgage loans require a higher down payment than government-backed loans. Most lenders require at least 5% down, and up to 20%. However, as featured above, there are a few conventional loan options in Florida that allow for 3% down.
• Property Type Eligibility: A conventional mortgage can be used for almost any type of property, including warrantable condos (condos that meet conventional mortgage requirements), modular homes, manufactured homes and multifamily residences with one to four units. Unlike government-backed loans, conventional loans do not have any owner occupancy requirements, which makes them an excellent option for second homes or investment properties.
• Debt-to-Income Ratio: Most conventional mortgage lenders will allow for a maximum DTI of 43%. Florida’s First Time Home Buyer Loan, however, allows for up to 50% DTI.
• Private Mortgage Insurance: Any borrower who applies for a conventional mortgage and pays less than 20% down on their home is required to pay PMI. PMI for a conventional loan generally costs between 0.5% and 1% of the entire loan on an annual basis, though this varies depending on the borrower’s credit rating.

In order to be approved for a loan, applicants must provide documents that verify their income, ability to pay debts, and regular spending habits. Use this checklist to prepare the documents you’ll need before meeting with your loan officer:

❏    Two years’ worth of employment information

❏    A list of assets and liabilities

❏    Government-issued identification

❏    Two years’ worth of W-2s

❏    30 days’ worth of pay stubs

❏    Two to three years’ worth of income tax returns

❏    IRS Form 4506-T (signed and dated)

❏    Two to three months’ worth of bank statements

❏    Two to three months’ worth of investment account statements

❏    Gift letter (if using gift funds)

❏    Credit report

❏    Bankruptcy/discharge papers for any documented bankruptcies

❏    Renting history

❏    Borrowers who are self-employed are required to present additional documentation, including proof of income, a current profit and loss statement and a list of all business debts.

With our combined 150 years of lending experience, the Blue Water Mortgage team is proud to provide services to New Hampshire, Maine, Massachusetts, Connecticut, Vermont, Rhode Island, Florida, North Carolina, Colorado, Texas, Georgia, and South Carolina. If you’d like to start a conversation about your conventional mortgage loan options, contact us today.