FHA Loans
in Florida

What Is an FHA Loan

An FHA loan is a mortgage insured by the Federal Housing Administration — a division of HUD. The insurance protects lenders against loss if the borrower defaults, which is what allows lenders to extend financing to borrowers with lower credit scores and smaller down payments than conventional guidelines permit.

FHA loans are originated by approved private lenders — banks, credit unions, and mortgage brokers — not by the government directly. Optimal Mortgage arranges FHA loans through a network of FHA-approved wholesale lenders and is licensed statewide across all 67 Florida counties.

The FHA tradeoff in plain terms: Lower entry barriers (credit, down payment, DTI) in exchange for mortgage insurance that costs more over time than conventional PMI in most scenarios. For the right borrower at the right moment, FHA is the correct tool. For a borrower who qualifies for conventional, it usually is not.

In Florida, FHA loan limits vary by county. Miami-Dade, Broward, Palm Beach, and Collier counties have elevated limits in 2026. Monroe County (Florida Keys) has the highest FHA limit in the state. Most other Florida counties use the standard floor limit.

Who FHA Loans Are Best For

FHA is not the default loan for buyers who cannot get approved elsewhere. It is a specific tool with specific strengths. Understanding those strengths — and where FHA loses to conventional — makes the difference between a good long-term decision and a costly one.

What usually creates problems on FHA files

• Property condition — FHA appraisers flag health and safety issues that conventional appraisals may not
• Non-owner-occupied properties — FHA requires the borrower to occupy the property as their primary residence
• DTI beyond 57% even with compensating factors — FHA has limits even with flexibility
• Recent bankruptcy or foreclosure — FHA has waiting periods (2 years after BK discharge, 3 years after foreclosure)

FHA Down Payment and Cash to Close

The 3.5% minimum down payment on FHA is one of its primary advantages — but cash to close is always more than the down payment alone. Florida buyers using FHA need to account for the upfront MIP, closing costs, and post-closing reserves when planning their total cash requirement.

Down payment options

• 3.5% down — available with 580+ credit score
• 10% down — required when credit score is 500-579
• Gift funds — FHA allows 100% of the down payment to come from a qualifying gift from a family member or approved donor
• Down payment assistance — FHA is compatible with many Florida DPA programs including those offered through Florida Housing Finance Corporation

The upfront MIP — 1.75% added to your loan

FHA charges an upfront mortgage insurance premium of 1.75% of the loan amount. On a $400,000 loan, that is $7,000 added to the loan balance at closing. Most borrowers finance this into the loan rather than paying it out of pocket — but it increases the loan amount and total interest paid. This is a cost that does not exist on conventional loans.

Total cash to close on a Florida FHA purchase

On a $400,000 FHA purchase with 3.5% down in Miami-Dade County, plan for approximately $14,000 down payment, $6,000-$10,000 in closing costs (including title insurance, escrows, prepaids), and adequate reserves. Total cash to close often runs $22,000-$28,000 on a transaction of this size — not $14,000.

FHA MIP — The Real Long-Term Cost

Mortgage insurance on FHA loans works differently than conventional PMI in two important ways: it includes an upfront charge at closing, and the annual premium in most cases stays for the life of the loan. Understanding this before you commit to FHA is essential to making the right long-term decision.

Upfront MIP (UFMIP)

1.75% of the loan amount, charged at closing and typically financed into the loan. This adds to your balance and to the total interest you pay over the life of the loan. It is not refundable in most scenarios.

Annual MIP

For most 30-year FHA loans with less than 10% down, the annual MIP rate in 2026 is 0.55% of the outstanding loan balance, charged monthly. On a $400,000 loan, that is approximately $183/month — every month, for the life of the loan. Unlike conventional PMI, this does not cancel when the loan reaches 80% LTV.

When MIP can be removed

• 10%+ down payment: MIP drops after 11 years — this is the exception
• Refinance to conventional: Once sufficient equity builds, refinancing to a conventional loan removes MIP entirely — this is the most common exit strategy for FHA borrowers
• FHA loans originated before June 2013: Had different rules — MIP could be removed at 78% LTV

The refinance window: Many Florida FHA borrowers refinance to conventional within 3-7 years as equity builds through appreciation and payment. Our team models this exit strategy at origination so you know what the transition looks like and when it becomes advantageous.

FHA Loan Requirements in Florida

FHA is more flexible than conventional on credit and DTI — but it has its own hard rules that can trip up unprepared buyers, particularly around property condition and occupancy.

Credit

580 minimum for 3.5% down. 500-579 requires 10% down. In practice, many lenders apply overlays and set their own minimums above FHA's floor — 620 is common among wholesale lenders. Our team works across multiple lenders and can identify which have the most favorable guidelines for your profile.

Debt-to-income ratio

FHA allows up to 57% back-end DTI with strong compensating factors — higher than the typical 45-50% conventional limit. This flexibility is one of FHA's genuine advantages for borrowers with significant existing debt obligations.

Property requirements — FHA Minimum Property Standards

• FHA appraisers assess health and safety in addition to value — conventional appraisals do not
• Peeling paint (pre-1978 homes), broken windows, roof condition, plumbing and electrical issues can require repairs before closing
• Properties in poor condition may not qualify for FHA — 203k rehabilitation loans are the alternative
• Condominiums must be on FHA's approved project list — fewer Florida condo projects are FHA-approved than conventional-eligible

Occupancy

FHA requires the borrower to occupy the property as a primary residence within 60 days of closing. Investment properties and second homes are not eligible for FHA financing. Multi-unit properties (2-4 units) are eligible if the borrower occupies one unit.