Conventional Loan in Florida: Down Payment, PMI and Who It Suits
A conventional loan Florida buyers use needs as little as 3% down. Here is how PMI works, when it drops off, and when FHA beats it instead.
Educational content only. This article is for informational purposes and does not constitute financial, legal, or lending advice. Loan programs, rates, and eligibility requirements change frequently. Consult a licensed mortgage professional before making any borrowing decision. Mortgage Capital | NMLS# 1859012 | Licensed in Florida.
A conventional loan Florida buyers take is any mortgage not insured by FHA, VA or USDA. It is the most common path for buyers with solid credit. It usually prices better than FHA above roughly 680.
The headline advantage is removable mortgage insurance. Once you reach 80% loan-to-value, PMI comes off. On most current FHA loans it never does. Our conventional loan page covers the full guideline set.
How little you can put down
Three percent, if you qualify as a first-time buyer under HomeReady or Home Possible. Five percent for most other buyers.
Those two programs also price mortgage insurance more favorably at the same loan-to-value. See HomeReady and Home Possible for the income limits, which are county-based and higher in South Florida than many buyers assume.
Twenty percent avoids PMI entirely, but it is not required and rarely the best use of cash in a market where prices move.
What PMI actually costs
PMI runs roughly 0.3% to 1.2% of the loan annually, driven by credit score and loan-to-value together. The two compound, so twenty points of credit score can move the premium noticeably.
On a $400,000 loan at 0.55%, that is about $183 a month. Model your own figure on the PMI calculator.
You can request cancellation at 80% of original value and it terminates automatically at 78%. Florida appreciation has let plenty of owners get there early with a new appraisal.
When FHA is the better choice
Below about 660, conventional pricing deteriorates faster than FHA does, and FHA mortgage insurance stops looking expensive by comparison.
FHA is also more forgiving after a recent credit event. If a bankruptcy or foreclosure sits inside conventional seasoning windows, look at FHA loans or our recent credit event loans.
Credit score changes more than the rate
Conventional pricing moves in credit tiers, and the steps are larger than most buyers expect. Moving from 679 to 680 can change both the rate and the mortgage insurance premium.
Because the two move together, twenty points of credit score sometimes changes the monthly payment more than a quarter point of rate would.
If you are close to a tier boundary, paying down a revolving balance before you apply is usually the highest-return thing you can do. Utilization moves scores faster than almost anything else.
Our credit score hub shows what each band qualifies for across programs.
Debt-to-income and the Florida escrow problem
Conventional underwriting generally wants total debt under 45% of gross income, with some flexibility above that for strong files.
The trap in Florida is that taxes and insurance sit inside that ratio. A high wind premium can push an otherwise comfortable borrower over the line on a house they could genuinely afford.
That is why the insurance quote should come early. Run your ratio on the debt-to-income calculator with the real escrow figure rather than an estimate.
Conforming limits and where jumbo starts
Above the county conforming limit the loan stops being a conventional agency loan and becomes a jumbo, with tighter credit, larger reserves and manual underwriting.
Several South Florida price points sit within a few percent of that line. So a modest price negotiation can move you across it and change your terms materially.
Appraisal gaps and how to handle them
Conventional loans size against the lower of purchase price or appraised value. A low appraisal creates a cash gap you must cover.
In competitive South Florida submarkets this happens often enough that buyers write appraisal gap coverage into offers, agreeing to bring a set amount if value falls short.
You can also challenge the appraisal with better comparable sales, though reconsiderations succeed less often than buyers hope.
Know your ceiling before you write the clause. Agreeing to cover $25,000 you do not have turns a negotiating advantage into a lost deposit.
Reserves, gift funds and where the money comes from
Conventional underwriting traces your down payment. Large deposits that do not match your documented income draw questions, and answering them slows the file.
You can use gift funds on a primary residence. But they need a signed gift letter and a paper trail from the donor's account to yours. Start that early rather than at underwriting.
Reserves are separate from the down payment. Some files need two to six months of payments left over after closing. The requirement rises on second homes and investment property.
Move money into position at least two months before you apply. After two statement cycles the funds season, and underwriters stop asking about them.
In summary
Conventional suits most Florida buyers above 680. Below that, price it against FHA before deciding.
Florida-specific things to check
Property taxes reset when you buy. The seller's bill reflects their homestead cap, and yours will not, so underwrite the non-homestead figure.
Insurance is the other trap. Get a real quote for the specific address rather than a rule of thumb, then run it through the conventional loan calculator.
Fannie Mae publishes its eligibility rules openly at Fannie Mae's HomeReady page if you want the source. We shop the file across lenders and show you the spread.