Florida Conventional Mortgage

If you’re looking to buy a home in Florida or considering an investment property, a conventional mortgage might be the perfect solution for you. Unlike government-backed loans such as FHA, VA, or USDA, conventional mortgages are offered by private lenders and offer more flexibility for your home financing needs. Whether you’re purchasing a primary residence, a beach home, or an investment property, a conventional loan can provide you with the freedom to choose the right property.

At APR Mortgage, we simplify the mortgage process by guiding you through every step with ease. Our expert team is here to help you find the best conventional loan option to suit your goals, ensuring you make informed decisions with confidence.

Ready to get started? Apply now to get your Pre-Approval and let us help you secure the home of your dreams.

What is a Conventional Mortgage Loan?

A conventional mortgage loan is a type of home loan that is not backed by the federal government. Instead, it is offered by private lenders such as banks, credit unions, or mortgage companies like APR Mortgage. These loans follow guidelines set by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac, but they are not insured by a government agency.

Conventional loans are highly popular and can be used to finance a wide range of properties, including primary residences, second homes, and investment properties. They offer borrowers greater flexibility compared to government-backed loans, which often have more stringent usage restrictions.

Conventional loans can be either conforming, meaning they meet the standards set by Fannie Mae and Freddie Mac, or non-conforming (jumbo loans), which exceed those limits and are designed for borrowers seeking to finance more expensive properties.

These loans typically come with competitive interest rates and various down payment options, making them an appealing choice for borrowers with strong credit and financial histories. However, since they are not insured by the government, conventional loans tend to have stricter qualification criteria and may carry higher interest rates compared to government-backed loans. Conventional loans offer flexibility, affordability, and a variety of options for both first-time buyers and seasoned investors.

Conventional Mortgage Loan Key Terms

Before diving into the details of conventional mortgage loans, it’s important to understand some key terms that will help you navigate the process with ease:

AMI (Area Median Income):

The Area Median Income refers to the midpoint of income levels in a specific geographical area. It is a key metric that lenders use to assess the eligibility of borrowers. Your income, relative to the AMI in your area, can influence your loan qualification and the amount you can borrow.

Credit Score:

A credit score is a numerical representation of your creditworthiness, based on your past ability to repay debts. Ranging from 300 to 850, a higher score indicates better credit health. Most conventional loans require a credit score of at least 620, though higher scores may offer more favorable terms.

DTI (Debt-to-Income Ratio):

Your Debt-to-Income Ratio (DTI) measures the percentage of your monthly income that goes toward paying debts like loans, credit cards, and your mortgage. Conventional lenders typically look for a DTI ratio below 43%, although some exceptions may apply based on the lender’s policies.

Fannie Mae & Freddie Mac:

These are government-sponsored enterprises (GSEs) created to provide liquidity and stability to the mortgage market. Most conventional loans are backed by Fannie Mae and Freddie Mac, ensuring that lenders have the financial security to offer competitive rates to borrowers.

Loan Limit:

A loan limit refers to the maximum loan amount allowed under conventional loan guidelines. These limits vary based on location and are set by the Federal Housing Finance Agency (FHFA). For areas with higher property values, loan limits may be adjusted to accommodate the local real estate market.

PMI (Private Mortgage Insurance):

Private Mortgage Insurance is required if your down payment is less than 20% of the home’s purchase price. PMI protects the lender in case you default on the loan. It typically costs between 0.5% and 1% of the loan amount annually, with rates depending on your credit score and the size of your down payment.

Conforming vs. Non-Conforming Loans:

A conforming loan meets the underwriting standards set by Fannie Mae or Freddie Mac, while a non-conforming loan (or jumbo loan) exceeds these limits. Non-conforming loans are often used for luxury properties or homes in high-cost areas, but they may come with higher interest rates.

Fixed vs. Adjustable Rate Mortgages (ARM):

Conventional loans come in two main types: Fixed-rate mortgages, where your interest rate stays the same for the life of the loan, and Adjustable-Rate Mortgages (ARMs), where the interest rate may fluctuate over time. ARMs can offer lower initial rates but come with the risk of future rate increases.

Florida Conventional Loan Requirements

Securing a conventional mortgage loan in Florida requires meeting a few key criteria, but it can offer flexibility and competitive terms. Here’s what you need to know:

1. Credit Score: Most lenders require a minimum 620 credit score, though higher scores (680 or 700) may be needed for better terms. At APR Mortgage, we work with borrowers who have a credit score of 620 or above.
2. Down Payment: A standard 20% down payment is typical, but you can qualify with less:
   • 3% for first-time homebuyers
   • 5% for non-first-time buyers
   • 10% for second homes
   • 20% for investment properties
   • Down payments can also be gifted from family members.
3. Debt-to-Income (DTI) Ratio: A maximum 43% DTI ratio is generally required, though exceptions can apply.
4. Property Types: Conventional loans apply to a variety of properties, including primary residences, second homes, and investment properties.
5. Credit History: Lenders expect a clean credit history with no recent bankruptcies or foreclosures (typically a 4-year waiting period).
6. Loan Limits: Florida’s loan limits are typically $726,200, though higher limits apply in some counties.

Benefits & Disadvantages of a Conventional Loan:

Get the best benefits with APR Mortgage. You can enjoy these: 

• Higher Loan Limits

  Conventional loans in Florida offer higher loan limits compared to government-backed loans, allowing you to purchase a larger home or one in a more desirable location.

• No Upfront Fees

  Unlike FHA or VA loans, conventional loans don’t require an upfront funding fee, helping to reduce your closing costs.

• Flexibility in Property Types
  

  These loans can be used for a variety of property types, including primary residences, vacation homes, and investment properties, offering more options than government-backed loans.

• Private Mortgage Insurance (PMI) Only When Necessary
  

  If you put down less than 20%, you’ll need PMI. However, once you reach 20% equity, you can eliminate PMI, which lowers your monthly payments.

• Competitive Interest Rates
  

  With a solid credit score and down payment, conventional loans may offer more competitive interest rates compared to government-backed loans, saving you money over the life of the loan.

• No Prepayment Penalties
  

  You can pay off your loan early without facing penalties, giving you the flexibility to save on interest if your financial situation improves.

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

Choosing between an FHA and a conventional mortgage in Florida depends on your financial situation. FHA loans are ideal for first-time buyers or those with lower credit scores, offering a smaller down payment (as low as 3.5%). 

However, conventional loans typically require a 20% down payment, but they offer higher loan limits, better interest rates, and more flexibility for borrowers with good credit. If you have strong financials, a conventional loan might be the better choice. Ultimately, it’s about your credit score, down payment, and long-term goals. Consult with a Mortgage Coach like APR Mortgage to find the best option.

Types of Conventional Loans in Florida Explained

Conventional loans in Florida come in various options to accommodate different financial needs and homeownership goals. Here’s a deeper look at each type:

Conforming Conventional Loan

These loans adhere to guidelines set by the Federal Housing Finance Agency (FHFA) and are eligible for purchase by Fannie Mae and Freddie Mac. They have a loan limit that varies yearly, and borrowers need to meet specific credit, income, and down payment criteria.

Best for: Buyers who meet FHFA loan limits and want competitive interest rates.

Nonconforming Conventional Loan (Jumbo Loan)

A jumbo loan is a type of nonconforming conventional loan that exceeds FHFA loan limits. It is ideal for higher-priced homes in Florida, where home values may exceed the conventional loan cap. Since these loans are riskier for lenders, they often require:

• A higher credit score (typically 700+)
• A larger down payment (10-20%)
• A strong debt-to-income (DTI) ratio

Best for: Buyers purchasing luxury or high-value homes that exceed standard loan limits.

Fixed-Rate Conventional Loan

This loan features a fixed interest rate throughout the loan term, providing stable and predictable monthly payments. Common terms include 15, 20, or 30 years, with longer terms offering lower monthly payments but higher overall interest costs.

Best for: Borrowers who prefer financial stability and plan to stay in the home long-term.

Adjustable-Rate Mortgage (ARM)

ARMs start with a lower introductory interest rate (e.g., 3, 5, 7, or 10 years) and then adjust periodically based on market conditions. While the initial rate is lower than a fixed-rate loan, payments can increase or decrease after the initial period.

Best for: Buyers who expect income growth or plan to move before the rate adjusts.

Conventional Renovation Loan

These loans are designed for buyers purchasing homes that need repairs or improvements. They allow borrowers to finance both the home purchase and renovation costs into a single loan. Popular options include:

• Fannie Mae’s HomeStyle Renovation Loan
• Freddie Mac’s CHOICERenovation Loan

Best for: Buyers looking to purchase fixer-upper homes or make significant upgrades.

Subprime Conventional Loan

For borrowers with lower credit scores or a higher debt-to-income (DTI) ratio, subprime loans provide an option to qualify for home financing. However, these loans often come with:

• Higher interest rates
• Stricter loan terms
• Larger down payment requirements

Best for: Borrowers with less-than-ideal credit who may not qualify for prime loans.

Florida-Specific Conventional Loan Programs

Florida offers unique conventional loan options to cater to specific borrower needs.

HomeReady and Home Possible Advantage

Designed for low-to-moderate-income borrowers, these loans offer:

• Just 3% down payment
• Lower mortgage insurance costs
• Flexible income requirements (considering nontraditional income sources)

Best for: First-time or low-income homebuyers looking for an affordable home loan.

First-Time Home Buyer Loan

For Florida first-time homebuyers, this loan allows a low 3% down payment with loan amounts up to $484,350. Some programs also offer down payment assistance to help cover upfront costs.

Best for: First-time buyers with limited savings for a down payment.

Florida Condo Loan

Since condo financing has stricter requirements, this loan provides as little as 3% down on condos that meet conventional lending criteria. Some condos may require additional HOA approval and financial reviews.

Best for: Buyers looking to purchase a condo in Florida with a minimal down payment.

Which Conventional Loan is Right for You?

With so many loan options, choosing the right one depends on factors like credit score, income, down payment, and long-term goals. Whether you are a first-time buyer, purchasing a luxury home, or renovating a property, there is a conventional loan tailored to your needs.

Need expert guidance? Contact an APR Mortgage professional today to explore your best mortgage options in Florida.

Documents Needed to Qualify for a Conventional Mortgage

When applying for a conventional mortgage, you’ll need to provide various documents to verify your financial stability and creditworthiness. Here’s a checklist to help you prepare:

1. Proof of Income:

• Pay Stubs: Recent pay stubs covering the last 30 days.
• W-2 Forms: W-2 forms from the past two years.
• Tax Returns: Federal tax returns for the previous two years, especially if you have variable income or are self-employed.
• Additional Income Documentation: Proof of any other income sources, such as bonuses, commissions, overtime, or rental income.

2. Employment Verification:

• Employer Contact Information: Details for your current employer to confirm your employment status.
• Self-Employment Documents: If self-employed, provide business tax returns and profit and loss statements for the past two years.

3. Asset Statements:

• Bank Statements: Statements from all checking and savings accounts for the past two to three months.
• Investment Accounts: Recent statements from retirement accounts, stocks, bonds, or other investments.
• Gift Letters: If receiving financial gifts for the down payment, include a letter stating the amount and that it’s not a loan.

4. Debt Information:

• Credit Card Statements: Recent statements showing current balances and payment history.
• Loan Statements: Documentation for any existing loans, such as student, auto, or personal loans.
• Alimony or Child Support: Proof of any obligations, including divorce decrees or court orders.

5. Personal Identification:

• Photo ID: A valid government-issued ID, such as a driver’s license or passport.
• Social Security Number: For credit and identity verification purposes.

6. Property Information (if applicable):

• Purchase Agreement: A signed agreement between you and the seller.
• Proof of Homeowners Insurance: Documentation showing coverage for the property.

Gathering these documents in advance can streamline the mortgage application process and demonstrate your preparedness to lenders. Keep in mind that specific requirements may vary by lender, so it’s advisable to consult with your mortgage professional for any additional documentation needed.

Get Started with APR Mortgage Today

Ready to explore your Florida conventional loan options? Our experienced team at APR Mortgage is here to guide you every step of the way. Contact us now to discuss your loan possibilities with one of our Mortgage Experts.

Click “Apply Now” to begin your mortgage application!