Home Loans In Orlando

Orlando is the county seat of Orange County in Florida. It is located in Central Florida and serves as the hub of the Orlando metropolitan area. It is the sixth-largest metro region in the Southern United States and the third-largest in Florida, trailing only Miami and Tampa Bay. Orlando is Florida’s fourth-largest city, after only Jacksonville, Miami, and Tampa.

Orlando’s real estate market favors sellers. A limited supply of homes in Orlando forces purchasers to compete, resulting in higher prices and faster sales. While the market is shifting, statistics indicate it is still a seller’s market. Real estate professionals define a balanced market as having five to six months of housing inventory. The current supply in Orlando is just 2.5 months, so most power remains with the seller.

Home Loan Programs in Orlando

There are several mortgage loans available for homebuyers in Orlando. Conventional and FHA loans are the most commonly used among them.

• Conventional loans

Conventional mortgages are offered by banks, private lenders, credit unions, and mortgage companies. The federal government does not back them and has stringent qualification requirements compared to government-insured or guaranteed loans. Conventional loans can either be conforming or non-conforming.

Conforming loans are mortgages that meet the Federal Housing Finance Agency’s (FHFA) loan limits and the funding requirements of Freddie Mac and Fannie Mae. Conforming loans are advantageous for borrowers with outstanding credit due to their low-interest rates.

Nonconforming home loans are mortgages that do not conform to the guidelines of government-sponsored enterprises (GSE) such as Fannie Mae and Freddie Mac and cannot be sold to them. GSE guidelines include, among other factors, a maximum loan amount, suitable properties, down payment requirements, and credit requirements.

The conventional conforming loan limit in Orlando for 2023 is $726,200. Any loan that exceeds this amount is considered a jumbo loan. To qualify for a conventional conforming loan, borrowers must meet specific requirements.

• Credit Score

Borrowers need a credit score of 620 to qualify for a conventional conforming loan. Borrowers with higher credit scores may be eligible for lower down payments and better interest rates.

• Debt-to-Income Ratio

In most circumstances, the DTI ratio should be less than 45%, although it may need to be lower if the borrower’s credit score is not excellent. The DTI ratio is calculated by dividing the borrower’s total monthly debt payments by their gross monthly income.

• Down Payment

A minimum down payment of 3 – 5% of the purchase price is typically required for a conventional conforming loan. A 20% down payment is needed f a borrower needs to avoid Private Mortgage Insurance (PMI).

• Loan-to-Value

The LTV ratio, which takes into account the size of the down payment and the loan amount, must comply with Fannie Mae and Freddie Mac guidelines, which are usually 95%. The LTV ratio is computed by dividing the loan amount by the property’s appraised value.

• Employment and Income

As evidence of their capacity to repay the loan, borrowers must provide proof of stable employment and income. Typically, a borrower must have a two-year verifiable employment history to qualify for a conventional conforming loan unless they can demonstrate military service or are a recent college graduate.

• Property Appraisal

An expert appraisal is required to determine the home’s actual market value and guarantee it meets the conditions for a conventional loan.

• FHA loans

FHA home loans are mortgages insured by the Federal Housing Administration and backed by the federal government. They are a popular choice among first-time homebuyers in Orlando. FHA loans are the most lenient mortgage program and the easiest to qualify for.  

To qualify for an FHA home loan, borrowers must meet specific requirements related to credit score, down payment, loan size, and debt-to-income ratio.

• Credit Score

To be eligible for the low down payment advantage, FHA loan applicants must have a minimum FICO score of 580. If the applicant’s credit score is less than 580, the down payment is 10%.

• Down Payment

For borrowers with a credit score of 580 or higher, the minimum down payment is 3.5 percent of the purchase price. A 10% down payment is required for borrowers with credit scores lower than 580.

• Loan Amount

The maximum loan amounts for FHA loans differ by region. In Orlando, the FHA loan limit for 2023 is $472,030, while the maximum is $1,089,300.

• Debt-to-Income Ratio

Lenders will look at the borrower’s DTI ratio, computed by dividing the total monthly loan payments by the borrower’s gross monthly income. FHA loans permit a higher DTI than conventional loans. Borrowers with outstanding credit may have a DTI of 50%. 

• Employment and Income

As evidence of their capacity to repay the loan, borrowers must have verifiable income and employment. FHA loans require a two-year employment history that can be verified. 

• Property Appraisal

An FHA-approved appraiser must appraise the property and meet FHA’s minimum property standards for safety, security, and soundness.

• Federal Taxes and Student Loans

To qualify for an FHA-insured loan, homebuyers must not be late on federal taxes or federal student loans.

• VA loans

A VA home loan is a mortgage loan backed and guaranteed by the United States Department of Veterans Affairs (VA). Its goal is to assist veterans, active-duty service personnel, and qualified surviving spouses in purchasing, constructing, or refinancing a property. A VA home loan has several advantages, including no down payment required, competitively low-interest rates, limited closing costs, and no need for Private Mortgage Insurance (PMI).

Applicants must meet specific eligibility requirements to qualify for a VA home loan.

• Homestead

VA home loans are for primary residence only. It must be for the borrower’s own personal occupancy. No second home or investment properties are allowed.

• Service Requirements

Applicants must meet one of the following scenarios:

• Served on active duty for at least 90 consecutive days during wartime.
• Served in an active-duty capacity for at least 181 days during peacetime.
• At least six years of Reserves or National Guard service are required.
• Applicants may also qualify if they have served 90 days of active duty during wartime, 181 days of active duty during peacetime, or 6 years in the National Guard or Reserves.

• Certificate of Eligibility

Applicants must have a valid Certificate of Eligibility (COE) to qualify for a VA-guaranteed mortgage.

• Credit Score

Although the VA has no minimum credit score requirement, lenders typically require at least a 620 credit score and proof of stable income.

• Employment

Lenders of VA loans typically require borrowers to have a stable income for at least two years to prove their capacity to repay the mortgage. However, there may be exceptions contingent on the circumstances.

• Property Requirements

The home must meet the minimum property requirements established by the VA, which include safety, structural soundness, and sanitation. A VA-assigned appraiser will inspect the property to verify that it fits these standards, and following a successful appraisal, the borrower will get a Notice of Value (NOV).

• USDA loans

USDA home loans, or Rural Development loans, are available in Orlando, Florida, and are intended to assist eligible low-income individuals or families in purchasing or repairing rural homes.  There are two main types of USDA home loans available in Orlando:

• USDA Direct Home Loans

These loans are directly funded by the U.S. Department of Agriculture and are targeted towards low-income applicants.

• USDA Guaranteed Home Loans

These loans are provided by private lenders and are backed by the USDA. They are available to low and moderate-income borrowers.

To qualify for a USDA home loan in Orlando, applicants must meet the following requirements:

• Income limits:

In Orlando, the computed income limitations for USDA-guaranteed loans are $75,650 for households with 1-4 people and $99,850 for families with 5-8 people.

• Adjusted income:

Applicants for a USDA direct loan must have an adjusted income equal to or less than the applicable low-income limit for the area where they desire to purchase a home. In addition, they must demonstrate a willingness and ability to repay loans.

• Housing:

Applicants must currently lack adequate, safe, and sanitary housing.

• Property eligibility:

The property must be located in a USDA-designated eligible rural region. The majority of the country, including suburban areas, is classified as qualifying rural.

• Credit requirements:

A USDA loan has no minimum credit criteria. Applicants with a credit score of 640 or higher, on the other hand, are eligible for the USDA’s automated underwriting system (AUS).

• Jumbo loans

Jumbo mortgages are home loans that exceed Fannie Mae and Freddie Mac’s conforming loan limits. The conforming loan limit in Orlando for 2023 is $726,200. A jumbo loan exceeds that amount. Jumbo loans are intended to finance more expensive houses and often have higher requirements for eligibility than conventional mortgages.

To qualify for a Jumbo loan, borrowers must meet the following requirements:

• High credit score:

A higher credit score is required to qualify for a jumbo loan than a conventional one. Lenders use your credit score to determine your financial reliability. While specific credit score requirements differ from lender to lender, a minimum credit score of 700 is typically required. Depending on the property type and the mortgage transaction’s nature, some lenders may require a minimum credit score of 720.

• Low debt-to-income ratio:

Jumbo loans typically require a low DTI ratio. Depending on the lender, the DTI ratio should be less than 43%, preferably below. Some lenders may be more flexible with the DTI ratio, but it should typically be less than 45%.

• Down payment:

Down payment: Jumbo loans frequently require a higher down payment than conventional loans. Lenders may require a 10% to 30% down payment. A 20% down payment eliminates the need for private mortgage insurance (PMI).

• Cash reserves:

Lenders often require jumbo loan applicants to have sufficient cash reserves to cover mortgage payments and other expenditures. Most jumbo loan lenders require a 6- to 12-month reserve. A lender’s requirement for a 24-month cash reserve is not uncommon.

Apply for a Home Loan in Orlando

Capital Home Mortgage is a direct lender and servicer of home loans in Orlando. If you want to buy a house in Orlando, Capital Home Mortgage can assist and guide you throughout the process. We control every aspect of your file, from application to underwriting, closing to funding.

Call our Orlando Home Loan Specialists at (239) 310-5599 to get started on your path to homeownership.