Home Loans In Tallahassee

Tallahassee is the state capital of Florida. It is the county seat and the county’s only incorporated municipality in Leon County. It is the state of Florida’s eighth-largest city. Tallahassee is the largest city in the Florida Big Bend and Florida Panhandle areas and the key commercial and agricultural center in the Florida Big Bend and Southwest Georgia regions.

In 2023, the Tallahassee real estate market is characterized by rising home prices, limited inventory, increased sales, and a developing interest in real estate development. However, the future number of transactions could be affected by the possibility of rising mortgage rates.

Home Loan Programs in Tallahassee

Several mortgage loans are available for Tallahassee homebuyers, each with specific qualification requirements and guidelines.

• FHA Loans

FHA loans, insured by the Federal Housing Administration, are designed for low-to-moderate-income borrowers who may have trouble meeting conventional loan requirements. They require a lower minimum down payment and credit score than many conventional loans.

FHA loans can be accessed through several programs. If the borrower’s FICO credit score is between 500 – 579, they may be eligible for an FHA loan with a 10% down payment. If the FICO score is 580 or higher, the required down payment decreases to 3.5%. 

To qualify for an FHA-insured loan, first-time homebuyers and the home they purchase must meet the FHA’s eligibility standards. Homebuyers must make a down payment of at least 3.5 percent and have verifiable income and employment. Moreover, the applicants must meet FHA loan requirements for credit score, down payment, loan size, and debt-to-income (DTI) ratio.

The FHA loan limits for 2023 in Leon County are $472,030 for a single-family residence, $604,400 for a duplex, $730,525 for a tri-plex, and $907,900 for a quadplex, respectively.

• Conventional Loans

A conventional mortgage is a home loan not guaranteed or insured by a government agency such as the Department of Veterans Affairs (VA) or the Federal Housing Administration (FHA). This type of mortgage also meets the funding criteria of Fannie Mae and Freddie Mac.

In Tallahassee, conventional home loans can have a term of anywhere from one to forty years and either a fixed or adjustable interest rate. These loans offer several benefits over government-backed loans, including lower fees and the requirement for private mortgage insurance (PMI) only when you don’t meet the 20% down payment threshold.

To qualify for a conventional loan, a borrower typically needs a down payment of 3% or more, although a 20% down payment would enable you to avoid purchasing mortgage insurance. The maximum loan amount for conventional loans in 2023 for Leon County is $726,200. Any amount over the limit must be a jumbo mortgage.

Credit score requirements vary from lender to lender, but 620 is the minimum credit score required to get a conventional loan in Tallahassee. However, a minimum score of 740 would yield a better mortgage rate.

Additionally, conventional loans typically require a maximum debt-to-income ratio of 43%, although this can be extended up to 49% depending on certain qualifying factors. Negative events on your credit report, such as bankruptcy or missed payments, may make it harder for you to qualify for a conventional loan.

• VA Loans

A VA home loan is a mortgage program available to veterans, active service members, and eligible surviving spouses. This program was introduced as part of the GI Bill in 1944 and offers several benefits, including the fact that it’s easier to qualify for than a traditional mortgage and does not require a down payment. VA loans in Tallahassee, Florida, offer a means to get long-term financing for a home that may not otherwise be accessible to those who qualify.

To qualify for a VA home loan in Tallahassee, you must first be eligible based on your service history and duty status. This eligibility is proven by obtaining a Certificate of Eligibility (COE), which shows your lender that you qualify based on your service history. The COE is a document that communicates to private lenders, such as banks, credit unions, or mortgage companies, that you have VA home loan eligibility and entitlement.

However, obtaining the COE doesn’t automatically guarantee a loan. To receive financing, you must still meet your lender’s credit and income loan requirements.

Several VA home loan programs are available to help you buy, build, or improve a home or refinance your current home loan. This includes a VA direct loan and VA-backed loans. You can learn more about these different programs to determine which best meets your needs.

Regarding property eligibility, the most common type is a single-family home, but many other types of homes can also qualify for a VA loan.

• USDA Loans

USDA home loans are available in Tallahassee for low to moderate-income homebuyers. The US Department of Agriculture guarantees these loans as a form of insurance. These loans can be used to buy, develop, repair, or refinance a property. The USDA home loan is a zero-down-payment mortgage for eligible rural areas, meaning the borrower doesn’t need to provide a down payment.

One option in Tallahassee is the USDA’s Single Family Housing Direct Home Loans program. The USDA Direct Home Loan, also known as the Section 502 Direct Loan Program, is a type of mortgage offered by the United States Department of Agriculture to help low- and very-low-income applicants obtain decent, safe, and sanitary housing in eligible rural areas. The program provides payment assistance to increase an applicant’s repayment ability.

The Single Family Housing Guaranteed Loan Program is another USDA loan available in Tallahassee. This program assists approved lenders in providing low- and moderate-income households in designated rural areas with the opportunity to possess adequate, modest, decent, safe, and hygienic houses as their primary residence. Prospective applicants must meet the required income eligibility requirement, and the property must be located in an approved rural area.

• Jumbo Loans

A jumbo home loan is a non-conforming loan that exceeds the Federal Housing Finance Agency (FHFA) limits. Unlike conventional mortgages, Fannie Mae or Freddie Mac cannot purchase, guarantee, or securitize a jumbo loan. This type of loan is designed to finance luxury properties and homes in highly competitive local real estate markets. For 2023, the conforming loan limit for most parts of the U.S., including Tallahassee, is $726,200.

Qualifying for a jumbo loan is more rigorous than for a conventional loan. You’ll need a stellar credit score—700 or above—and a very low debt-to-income (DTI) ratio. The DTI should be under 43% and preferably closer to 36%. Lenders will review your credit report for any negative items, such as missed or late payments, foreclosures, and bankruptcies.

Jumbo loans typically have down payment requirements of 10% to 15%, although this could have been as high as 30% in the past. It’s also important to note that the interest rates for jumbo loans have been closing in on those of conventional mortgages in recent years, and in some cases, they may even be lower.

Finally, the amount you can borrow with a jumbo loan depends on your assets, credit score, and the property value you’re interested in buying. These mortgages are often targeted towards high-income earners who make between $250,000 to $500,000 a year.

• Non-Qualified Mortgage Loans

Non-qualified mortgage loans (Non-QM) are home loans that don’t meet the standard documentation requirements outlined by the Consumer Financial Protection Bureau (CFPB). These loans allow you to qualify based on alternative methods instead of the traditional income verification required for most loans. Some examples include bank statements or using your assets as income.

Non-QM loans cover various mortgages, such as home loans exceeding 30-year terms or with negative amortization. They are often suitable for people with unique income situations, and non-traditional income verification methods are often employed. Borrowers who benefit from these include the self-employed, individuals with high debt-to-income ratios, those with lower credit scores, and retired individuals.

A type of non-QM loan is the 1099 mortgage, which allows borrowers to use their 1099 forms to show their income. Another type is the asset-based loan, where approval does not rely solely on your income or credit score but can consider your assets. 

However, it’s important to note that non-QM loans usually come with higher interest rates and fees due to the lending risk associated with this type of mortgage. Not all mortgage lenders offer non-QM loans, which may be harder to find.

Apply for a Home Loan in Tallahassee

Capital Home Mortgage will assist you if you want to buy a house in Tallahassee. We have home loan programs for your needs, whether you’re considering purchasing a primary residence or an investment property.

Call (239) 310-5599 to speak with our Tallahassee home loan experts. We can help you with your home loan needs and will walk you through the process, from application to loan closing and funding.