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Florida Conventional Mortgage Programs & Requirements

Florida offers sunshine, white sand beaches, and plenty of attractive properties for sale. If you’re considering a move to Florida, or are interested in investment opportunities there, you’ll want to research your mortgage loan options beforehand.

To start, here are the primary types of mortgages available nationwide:

FHA (Federal Housing Authority): Government-insured

VA (Department of Veterans Affairs): Government-insured

USDA (United States Department of Agriculture) Rural Development: Government-insured

Conventional (Fannie Mae and Freddie Mac): Privately insured

For more information on FHA, VA or USDA loans, please follow the links provided. In this post, we’ll focus on the ins and outs of conventional loans and related programs available in the Sunshine State.

What is a Conventional Mortgage Loan?

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.

Conventional Mortgage Loan Key Terms

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.

FHA vs. Conventional Mortgage: Which Is Better in FL?

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:

Conventional FHA VA USDA
Backed By Fannie Mae or Freddie Mac U.S. Federal Housing Administration U.S. Department of Veteran Affairs U.S. Department of Agriculture
Min. Credit Score 620–640 (depending on the lender) 500–580 (depending on the lender) No minimum credit score requirement No minimum credit score requirement
Max DTI 35% (though some lenders accept 43%) 45%–50% (depending on the lender) 41% 41%
Min. Down Payment 5% (though 3% down options are available) As low as 3.5% down $0 down payment $0 down payment
Eligible Property Types Any property type, including second homes and investment properties Primary residences only; property must be owner occupied Primary residences only; property must be owner occupied Primary residences only; property must be owner occupied
PMI No PMI for borrowers who put 20% down; between 0.5% and 1% for all other borrowers PMI comes with an upfront premium of 1.75% of the loan amount; between 0.45% and 1.05% for the remainder No PMI No PMI
Other Notes Borrowers can apply for either a conforming or non-conforming loan Borrowers can also apply for an FHA 203(k) renovation loan Available only to active-duty veterans w/ 90+ days of service during wartime or those who served 181 days continuous active duty during peacetime Only low- to-moderate income buyers in rural USDA-approved areas are eligible

Conventional Loan Options Available in FL

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

Loan Type Requirements
5% down with PMI (Conventional 95) One loan at 95% loan-to-value ratio. PMI required.
Conventional 97 3% down. No income limits.
HomeReady® 3% down. Applicants must be at or below the geographical area’s median income, unless home is located in an underserved area.
90% loan One loan with 10% down. PMI required.
Piggyback 80/10/10 10% down, 10% second mortgage, and 80% conventional loan. No PMI required.
Home Possible Advantage 3% down loan with income restrictions. Offered by Freddie Mac home lenders.
Down Payment Gift Applicants may receive any percentage of the down payment as a gift from family or other eligible source.

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.

The Pros & Cons of Conventional Loans in FL

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

Pros Cons
With a conventional loan, borrowers have a choice of 15, 20, 25 or 30-year mortgage terms. Conventional loans have a higher minimum credit score requirement than government-backed loans.
Conventional mortgages are available as fixed-rate or adjustable rate mortgages. Conventional loans require a higher down payment than government-backed loans.
Borrowers can apply conventional loans to almost any type of property. Conventional mortgages are typically harder to qualify for.
Depending on the type of conventional mortgage, borrowers could pay as little as 3% down. Conventional mortgages come with strict income guidelines.
Conventional loan borrowers are eligible to borrow more than other loan types. Conventional loans have slightly higher rates than government-backed loans.
Borrowers can avoid PMI by putting 20% down, or even cancel their PMI. Borrowers must have reserve money left over in the bank after their down payment.
Conventional mortgage loans don’t have owner occupancy requirements, meaning that they can be attractive to a buyer interested in investment properties. Government-backed loans often require owners to live onsite for a period of time if they purchase a multifamily property.

Requirements for Conventional Mortgage in FL

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.

Documents Needed to Qualify for a Conventional Mortgage

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.

How Blue Water Mortgage Can Help

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

Roger is an owner and licensed Loan Officer at the Blue Water Mortgage office in Hampton, NH. Roger graduated from the University of New Hampshire Whittemore School of Business and has been in the mortgage industry for over 20 years. Roger has originated over 2500 residential loans and is licensed in New Hampshire, Massachusetts, Maine, Connecticut and Florida.

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