Home Purchase Loans In Orlando

In Orlando, Florida, the housing market has been very active over the past few months and is still very hot. Zillow thinks that home prices will go up by 6.5% in the next year. But rising interest rates and the chance of a slump could make the market less hot1. The most important thing to note about the July 2023 housing market report is that interest rates went up to 6.8%, the second-highest rate in Central Florida in the last 20 years.

Purchase Loan Options in Orlando

Orlando home buyers have several mortgage options when financing a home purchase. The most popular among them are the following:

• Conventional – Conforming Loans

A conventional conforming loan in Orlando, Florida, is a mortgage that complies with the rules established by the Federal Housing Finance Agency (FHFA), as well as Fannie Mae and Freddie Mac. The significant characteristics of these loans are their conformity to the FHFA’s maximum mortgage amounts and their ability to be sold to government-sponsored organizations such as Fannie Mae and Freddie Mac.

Orlando’s 2023 conforming loan limits are $726,200 for a single-unit home, $929,850 for a duplex, $1,123,900 for a triplex, and $1,396,800 for a quadplex.

The advantages of choosing a conventional conforming loan over a non-conforming loan include lower interest rates and fewer mortgage insurance requirements. Furthermore, these loans are often less expensive than Federal Housing Administration (FHA) loans.

To qualify for a conventional conforming loan, it is normally required to have a minimum credit score of 620. In addition, these loans usually require a down payment, typically as low as 3 percent, but can differ depending on the lender and the borrower’s credit profile. Additional underwriting criteria, such as the debt-to-income ratio and employment history, are considered during the application process.

• FHA Home Loans

The FHA (Federal Housing Administration) home loan in Orlando, Florida, is a mortgage that receives insurance coverage from the federal government. One notable characteristic of an FHA loan is its comparatively lenient credit score requirements. Prospective borrowers may be eligible for this type of loan with a credit score as low as 580, accompanied by a minimum down payment of 3.5%.

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

The advantages of an FHA loan include lower credit score requirements and more lenient debt-to-income ratios, making it accessible to first-time buyers and those with imperfect credit. FHA loans do require mortgage insurance premiums, which can increase the overall loan cost.

FHA loans are typically simpler to qualify for than conventional ones but have higher mortgage insurance costs. Conversely, conventional loans require a higher credit score, generally at least 620, and may have more stringent underwriting standards. Conventional loans do not require mortgage insurance if the down payment is at least 20%.

• USDA-Guaranteed Home Loans

A USDA-guaranteed home loan in Orlando, Florida, is a mortgage program supported by the United States Department of Agriculture that promotes homeownership in rural and select suburban regions. One of its defining characteristics is that it offers 100% financing, removing the requirement for a down payment. Furthermore, the program frequently provides competitive interest rates and lower mortgage insurance expenses. Eligibility requirements for a USDA-guaranteed loan often include particular income limitations that vary by region and the property being located in a USDA-designated rural area.

Compared to conventional loans, the advantages of a USDA-guaranteed loan include a $0 down payment, lower mortgage insurance fees, and more flexible credit score requirements. These benefits make the USDA-guaranteed loan an appealing alternative for first-time homeowners or those with low down payment cash.

Unlike USDA direct loans, USDA-guaranteed loans are funded by private lenders and guaranteed by the USDA. Funded directly by the federal government, USDA direct loans are typically reserved for low-income households. The borrower must usually be without “decent, safe, and sanitary housing” to qualify for these direct loans, which may provide payment subsidies and have more flexible eligibility requirements.

• VA Home Loans

A VA home loan in Orlando, Florida, is a mortgage option backed by the United States Department of Veterans Affairs accessible to qualified service members, veterans, and surviving spouses. This financing scheme is notable for requiring no down payment and no private mortgage insurance (PMI), making it a financially appealing option for qualified applicants. Eligibility for a VA loan is contingent on completing service length standards, which vary depending on whether the service happened during a war or a peacetime era, and acquiring a Certificate of Eligibility from the VA.

A VA home loan has various advantages, including the absence of a down payment, the lack of PMI, potentially reduced interest rates, and more relaxed credit standards compared to conventional loans. These benefits may make homeownership more accessible to military personnel who have served or are currently serving.

Conversely, conventional loans are not backed by the government and frequently need a down payment ranging from 3% to 20%, as well as PMI if the down payment is less than 20%. Furthermore, conventional loans often have stricter credit and income restrictions than VA loans. Because conventional loans lack government backing, interest rates may be higher, depending on the borrower’s credit history.

• Construction Loans

A construction home loan in Orlando, Florida, is a type of mortgage used to finance the construction of a new home. The construction-to-permanent loan is a common type that offers financing for construction and then converts to a standard mortgage once work is completed. A variable interest rate during the construction phase and the ability to lock in a fixed rate for the mortgage phase are typical features. The essential advantage of a construction-to-permanent loan is the smooth transition from construction financing to a permanent mortgage, which is generally accomplished with only one set of closing costs. A considerable down payment (usually 20-30%), a solid credit history, and a precise development plan may be required for eligibility.

The key distinction between an ordinary two-time close construction loan and a one-time close construction loan is the number of loan applications and closings. A two-time close construction loan consists of two transactions: the first loan covers the construction, and the second (the permanent mortgage) is obtained upon completion. This necessitates two distinct closings, each with its own set of costs. On the other hand, a one-time close construction loan has a single closing. It instantly transfers from the building period to the permanent mortgage, lowering closing costs and administrative burdens.

Both types of construction loans have advantages and disadvantages. While a one-time close loan provides convenience and potentially lower costs, its rates may be slightly higher than those of a two-time close loan, which offers the opportunity to re-qualify for a potentially better rate after the construction phase but comes with the inconvenience and expense of two separate closings.

• Jumbo Loans

A jumbo home loan in Orlando, Florida, exceeds the Federal Housing Finance Agency’s (FHFA) conforming loan limits. Unlike conventional loans, which follow Fannie Mae and Freddie Mac rules, jumbo loans are not eligible for purchase, guarantee, or securitization by these government-sponsored enterprises. A jumbo mortgage loan size varies by location but is usually any loan amount larger than $726,200 for a single-family residence in Orlando, based on 2023 limitations.

The ability to finance luxurious homes and properties in competitive housing markets with high median home prices is a feature of jumbo loans. The advantages are contingent upon a solid financial standing and frequently include competitive interest rates. Typically, the eligibility requirements for jumbo loans are stricter than those for conventional loans. Typically, borrowers must have a credit score of 700 or higher and a low debt-to-income ratio. Additionally, a larger down payment, ranging from 10% to 20%, is commonly required.

The primary distinction between jumbo and conventional loans is the loan amount and underwriting standards. Although conventional loans typically have fewer eligibility requirements and the potential for a smaller down payment, they are limited by the conforming loan limit. On the other hand, Jumbo loans surpass this limit. Still, they are subject to stricter qualifications and frequently necessitate a more significant initial financial investment in a higher down payment.

• Non-Qualified Mortgage Loans

A Non-Qualified Mortgage (Non-QM) loan in Orlando, Florida, is a mortgage that does not fulfill the Consumer Financial Protection Bureau’s requirements for Qualified Mortgages. Non-QM loans may have interest-only payment alternatives, larger debt-to-income ratios, and maturities of more than 30 years. The main advantage of Non-QM loans is their adaptability; they may accommodate self-employed borrowers with inconsistent income or other conditions that do not fit within the limits of traditional loans. Eligibility requirements vary according to the lender but may include more significant down payments, higher interest rates, and a more thorough evaluation of the applicant’s financial status.

The main distinction between a Non-QM loan and a conventional loan is compliance with government requirements. Conventional loans generally comply with Fannie Mae and Freddie Mac rules. They must meet the Qualified Mortgage criteria, which include verification of ability to repay and restrictions on loan features such as negative amortization and balloon payments. Non-QM loans do not conform to these rules, allowing for a broader range of loan designs but frequently at the expense of higher interest rates and stricter eligibility restrictions.

Both types of loans have advantages and disadvantages and serve various borrower requirements. Non-QM loans provide an alternative route to homeownership for those who do not fit the typical lending profile. Conventional loans offer security and frequently reduced interest rates to those who qualify. Therefore, the choice between the two would depend on a person’s financial situation and home-buying needs.

Apply for an Orlando Home Purchase Loan

Capital Home Mortgage Orlando offers choices for every mortgage need as a direct Florida lender and servicer. Our mortgage experts can help you find a lending program that fits your budget and needs. Our loan professionals provide tools, support, and flexibility to help consumers choose the best mortgage package since all loans are unique. 

Call (239) 310-5599 to speak with an Orlando Home Loan Specialist.