FHA Loans In Florida For Homebuyers And Borrowers With Bad Credit

by Mike Gracz

FHA loans in Florida are the best home mortgage loan program for first-time homebuyers with bad credit and low credit scores. HUD agency mortgage guidelines are substantially easier for homebuyers to qualify for FHA loans in Florida versus conventional loans. Florida is becoming the state with the highest number of people migrating from other states. The Republican-led state is very popular among Americans trying to flee their high-taxed states and seek a final place to call home with lower taxes, lower cost of living, and affordable housing.

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More Americans Migrating To Florida Than Any Other State In The Nation

The Booming Florida Housing Market

Tens of thousands of families from New York and California are moving to Florida to seek a better way of life with less government control and take advantage of Florida’s robust economy. Florida Governor Ron DeSantis is becoming a national star with his stance on no mandates of masks and the vaccine. DeSantis never shut the state down due to the coronavirus outbreak. Florida businesses are thriving. The massive migration to the state is creating more demand for housing.

The American Dream Of Buying A Home In Florida

There are beaches, entertainment, and beautiful weather to enjoy each and every single day. Buying a home for the first time can be intimidating, especially because a home is a huge investment. When purchasing a home, it is essential to know that you have many different loan options available for you. For example, you can use a conventional loan or an FHA loan. If you want to learn more about the difference between an FHA loan and a conventional loan, then you came to the right place. This brief guide will cover what an FHA loan in Florida is and who you can reach out to for more information.

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Strong Florida Housing Market Forecast Expected To Continue For 2022

Homebuilders are working around the clock throughout the state to keep up with the demand for new housing. Governor DeSantis publicly declared the state is offering a $5,000 dollar sign-on bonus to police officers and first responders who relocate to Florida due to getting fired by their agencies due to the vaccine mandate. President Joe Biden has issued an executive order to all employers with 100 or more employees to require all of their employees to get vaccinated. The courts have ruled Biden’s vaccine mandate illegal and unconstitutional. Despite the court ruling, the Biden Administration has released a statement to disregard the court ruling.

Tens Of Thousands Of Individuals And Businesses Moving To Florida: Most Are Buying Homes Versus Renting

Florida FHA loan requirements make qualifying for a home easy for first-time homebuyers and borrowers with credit scores down to 500 FICO and bad credit. Nothing is more exciting than purchasing your first home in the beautiful sunshine state of Florida. What isn’t there to love? Florida has one of the highest migration rates in the country. More people are moving to Florida from high-taxed states like Illinois and New York than any other state in the nation.

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FHA Loans In Florida Is Home Loan Of Choice Due Easy Credit Options

Employers not abiding by Biden’s vaccine mandate will face tens of thousands of dollars in fines and other forms of penalty. The state is experiencing a mass number of people relocating to Florida. Many of the new residents are homebuyers. Capital Lending Network, Inc. is a mortgage lender licensed in multiple states and does a large percentage of its business in Florida. FHA loans are the most popular loan program in the state of Florida.  FHA loans benefit first-time homebuyers, home buyers with higher debt to income ratio, borrowers with less than perfect credit and lower credit scores, and homebuyers transferring from other states with new employment offer letters. In this article, we will discuss and cover the lending requirements and guidelines to qualify for FHA loans in Florida.

FHA Loans In Florida For First-Time Homebuyers

More and more renters are getting qualified for a mortgage so they can start shopping for a home in Florida. Renters realize the skyrocketing home prices and booming housing market. People who were in no hurry to buy a home are changing their plans and getting qualified and pre-approved for a mortgage before they get priced out of the housing market. They know rates are going to increase substantially due to the inflation numbers.

Florida Home Prices Skyrocketing To Record High But Homes Are Still Affordable

Home prices in Florida have been skyrocketing the past couple of years. FHA loans are the most popular loan program for first-time homebuyers in Florida. Homebuyers in Florida can qualify for a 3.5% down payment home purchase FHA loan with a 580 credit score. Recent college graduates with a new job right out of collect are eligible to qualify for an FHA loan in Florida without any work experience. This holds true for graduates of graduate and professional schools. Doctors, dentists, lawyers, and educators can qualify for a mortgage after they graduate without the prior 2-year of work experience. HUD exempts the prior work experience for recent graduates. The years as a full-time student are equivalent to the work experience.

FHA Loans In Florida For Borrowers With No Credit Scores And No Traditional Credit Tradelines

FHA Loans In Florida For Borrowers With No Credit Scores And No Traditional Credit Tradelines

Many first-time homebuyers who recently graduated do not have any credit scores. HUD allows borrowers with no credit scores to use non-traditional credit tradelines versus traditional credit tradelines. Non-traditional credit tradelines are creditors that do not report to the three credit bureaus. Examples of non-traditional credit tradelines include utilities, cell phone bills, education bills, insurance bills, rent payments, and other creditors the borrower may have been paying timely for the past 12 months.  The borrower needs to have a record of paying the non-traditional creditor timely for the past 12 months. Borrowers with no credit scores need to have their files through manual underwriting. HUD manual underwriting guidelines apply.

FHA Loans In Florida For Borrowers With Bad Credit And Lower Credit Scores

FHA loans are the best loan program for borrowers with prior bad credit and lower credit scores. Borrowers who cannot get an approve/eligible per automated underwriting system and gets a refer/eligible can qualify for an FHA loan in Florida with a manual underwrite if the borrower meets HUD’s manual underwriting guidelines. Outstanding collections and charged-off accounts do not have to be paid. Prior bad credit such as collections, charged-off accounts, late payments is not a problem. However, borrowers need to have been timely with all of their monthly payments in the past 12 months to have a good chance to get an approve/eligible per automated underwriting system.

FHA Loans In Florida With 500 Credit Scores

Borrowers with credit scores down to 500 FICO can qualify for an FHA mortgage.  The team at Capital Lending Network, Inc. are experts in helping borrowers with prior bad credit and lower credit scores qualify for an FHA loan in Florida. We have no lender overlays on FHA loans. Over 75% of our borrowers are folks who could not qualify at other lenders or got a last-minute mortgage loan denial.

Qualifying For A Florida FHA Loan After Bankruptcy And Foreclosure

Homebuyers can qualify for a mortgage after bankruptcy and/or a housing event. There is a two-year waiting period after the Chapter 7 Bankruptcy discharge date to be eligible for an FHA loan. There is a three-year waiting period after foreclosure, deed in lieu of foreclosure, short sale to qualify for an FHA loan. Borrowers in an active Chapter 13 Bankruptcy repayment plan can qualify for an FHA loan after being in the repayment plan for 12 months. Chapter 13 Bankruptcy does not have to be discharged. Trustee approval is required. The file needs to be a manual underwrite.

Florida FHA Loan Requirements After Chapter 13 Bankruptcy

There is no waiting period after Chapter 13 Bankruptcy is discharged. If the Chapter 13 Bankruptcy discharge is less than 24 months, the file needs to be a manual underwrite. You should never have any late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale. Late payments after bankruptcy and/or a housing event are some of the worst things you can have. Most lenders will classify people with late payments after bankruptcy and/or foreclosure as second offenders. However, Gustan Cho Associates dba Capital Lending Network, Inc. can help borrowers with late payments after bankruptcy and/or foreclosure.

Florida FHA Loan Requirements Versus Conventional Mortgages

One important thing homebuyers need to realize is that not all Florida lenders have the same mortgage loan requirements and guidelines on FHA and conventional loans. Most mortgage lenders have lender overlays. Lender overlays are additional lending requirements on top of the minimum agency mortgage guidelines. Nexa Mortgage LLC dba Capital Lending Network, Inc. is a mortgage lender licensed in multiple states including Florida. Capital Lending Network, Inc. is one of the very few lenders with no lender overlays on government and conventional loans. We just go off the minimum agency mortgage guidelines and have zero lender overlays on government and conventional loans.

Understanding Florida FHA Loan Requirements

An FHA loan in Florida is a government-backed loan. The Federal Housing Administration issues these loans, and they have less-restrictive qualifications. This loan is outstanding for those with a lower credit score or who want to put down a smaller amount of money on a home. FHA loans are the most popular loan programs for first-time homebuyers, borrowers with less than perfect credit, borrowers with little to no credit tradelines, recent college graduates, borrowers with higher debt to income ratio, and borrowers with credit scores down to 500 FICO. The front-end debt to income ratio is capped at 46.9% and the back-end debt to income ratio is capped at 56.9% on FHA loans to get an approve/eligible per automated underwriting system.

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What Are Conventional Loans

Qualifying For A Florida FHA Loan After Bankruptcy And Foreclosure

Conventional loans do not have the same federal backing as an FHA loan does. To qualify, you will need to have a higher down payment and a higher credit score with a conventional loan. Conventional loan lenders also look more into an applicant’s debt-to-income ratio. Normally, the debt to income ratio is capped at 45% on conventional loans. Higher credit score borrowers can go up to a 50% DTI. Conventional loans are also known as conforming loans. Conforming loans “conform” to the standards set out by Fannie Mae and Freddie Mac, who are government-created entities that buy mortgages from lenders. Fannie Mae and Freddie Mac then turn these mortgages into “mortgage-backed” securities.

Florida FHA Loan Requirements On Credit Scores On FHA Loans 

Most lenders look at your FICO score or use a Vantage Score, which is two credit scoring models. Your credit score can range from poor to excellent, depending on the number that you have. If your score is between 500 to 579, your credit score rating is considered to be poor. A credit score of 800 and above receive an excellent rating. Any number in between gets a fair rating. If you want to buy a home, you will need to ensure that your credit score is where it needs to be. There are several different factors taken into consideration when building your score number.

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The Anatomy On How Credit Scores Are Calculated

Credit building factors:

  • Types of credit you have
  • Length of your credit history
  • How you use your credit
  • Do you make on-time payments
  • Your new credit accounts

The credit score number for a conventional loan differs from an FHA loan. It is best to make sure that you keep your accounts in good standing to ensure that you have a high enough score to qualify for a mortgage.

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Credit Score Requirements On Conventional Loans

The credit score requirements for a conventional loan depend on the lender that you choose. In general, most conventional lenders want to see that you have a score of at least 620 to qualify. A 620 credit score is considered a low credit score on conventional loans. There will be loan level pricing adjustments on a 620 credit score on a conventional loan. The credit score requirement for traditional loans is higher than an FHA loan because of the risks the lender takes on. As mentioned earlier, conventional loans do not have government backing, so they depend on you to not default on your loan. Conventional loans are more credit score sensitive.

Down Payment Requirements Versus Private Mortgage Insurance On Conventional Loans

Many people assume that they need to put down 20% of their home loan before getting a conventional loan, but that is not true. Some lenders will allow you to put down less than 20% in exchange for private mortgage insurance. This private mortgage insurance, also known as PMI, protects the lender if you default on your home loan. A smaller down payment equates to more of a risk that the lender has to take on. These lenders will require you to have the PMI if you put down less than 20%. You will pay for this private mortgage insurance each month in addition to your monthly mortgage payment. First-time homebuyers can qualify for a conventional loan with a 3% down payment. Otherwise, a 5% down payment is required. Fannie Mae and Freddie Mac define a first-time homebuyer as a buyer who did not have any ownership of a home in the past three years.

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What Are Mortgage Interest Rates on FHA Loans?

Many different high-level factors affect the mortgage interest rate on conventional loans. Credit scores are one of the largest factors in determining interest rates. Type of the property, the loan size, the debt to income ratio, and the down payment (on conventional loans) are all taken into consideration when lenders determine mortgage rates. Rates on conventional loans are substantially higher for borrowers with credit scores under 680 FICO.

Another factor that determines mortgage rates is the status of the federal reserve.

Other high-level factors:

  • Investor demands
  • The current state of the economy

Though these factors are crucial and they affect the interest rate of your loan, there are a few factors that you can control. For example, you can control your credit score, your down payment amount, and the amount that you borrow. Your credit score may fluctuate randomly, but you are mainly responsible for ensuring that your accounts are in good standing and that you make your payments on time.

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Understand Loan To Value

Your loan-to-value ratio, LTV, refers to the loan amount you took out compared to the value of your property. If you borrow more than you need to, you may have to pay more a month on your mortgage. It is important to note that lenders prefer to qualify candidates with higher credit scores. A high credit score tells the lender that you are responsible for your finances and can handle a mortgage.

Conventional Loan Limits

It is important to note that even if you qualify for a conventional loan, there is only so much that you can borrow.

It is important to note that even if you qualify for a conventional loan, there is only so much that you can borrow. In Florida, the conventional loan limit is around $647,200. FHA loan limits are capped at $422,680. If you need a larger loan amount, you may need to opt for a conventional versus an FHA loan.

2022 Conforming Loan Limits In Florida

Your lender should let you know what you qualify for based on your income and other factors they consider. If you need a loan larger than the $647,200  limit, you will need to apply for a jumbo loan. A jumbo loan is a non-conforming loan, meaning that Freddie Mac or Fannie Mae does not back them. These jumbo loans have stricter requirements because they are higher in price, thus resulting in more risk for the lender.

Conventional Loan PMI

As mentioned earlier, if you do not put down 20% on your conventional home loan, you will need to pay for PMI. You can either pay a monthly premium each month or opt to pay for the insurance upfront. Most people prefer to pay a monthly payment to help offset the cost of their premium. There is an option for you to split the premium upfront with the seller of the home you want to purchase. The seller will need to agree to these terms, but it is still a possibility. You and the seller will agree that the seller will pay an upfront amount while you pay the remainder monthly. Lastly, if you want, there is an option to have your lender purchase the PMI insurance. If you decide to go this route, you cannot cancel the lender-paid private mortgage insurance. It is also important to note that you will pay a higher interest rate when paying directly to your lender if you go this route. Your rate is higher because the lender agreed to take on an additional expense for your convenience.

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Should I Get a Conventional Loan Versus FHA Loans?

Everyone’s situation differs, but if you want to aim for a conventional loan, you will need to ensure that you have a credit score of at least 620. You will also need to make sure you have at least 20% to put down on your home, or you will pay for PMI. An applicant with a low debt to income ratio will most likely receive consideration from a conventional loan lender.

Minimum FHA Loan Credit Score Requirements

Borrowers with credit scores down to 500 FICO are eligible for an FHA loan. If borrowers’ credit scores are between 500 to 579 FICO, HUD requires a 10% down payment instead of a 3.5% down payment. FHA lenders require applicants to have at least a score of 580 to qualify for a 3.5% down payment home purchase FHA loan.

Down Payment Requirements on FHA / Conventional Loans

As stated earlier, if you apply with a score below 580 but above 500, you will most likely need to put down 10% on your loan. If you have a credit score above 580, you can put down as little as 3.5% on your home loan.

Case Scenario On Home Purchase

To put this into perspective, let’s say you found a home for $250,000. With a credit score of 580 or above, you can expect to put down $8,750. If your score ranges between 500 to 579, you will need to put down $25,000 on that $250,000 home.

FHA Mortgage Rates Versus Conventional Rates

If you are a first-time homebuyer, you will like the competitive rates that FHA loans offer.

If you are a first-time homebuyer, you will like the competitive rates that FHA loans offer. FHA rates are historically lower because they are government-backed loans which decrease the risk for your chosen FHA lender. Like a conventional loan, the interest rate on your FHA loan depends on your credit score, income, and the amount you borrow. Your lender will also consider your down payment when generating your interest rate.

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What Are The Maximum Loan Limits On FHA Loans

The Federal Housing Administration sets the limits on FHA loans each year. These limits depend on your home’s location. The 2022 FHA limit in Florida is $422,680. You can always check out the loan limit information on the FHA Mortgage Limits website set by the U.S. Department of Housing and Urban Development. Unlike the conventional loan, you cannot request a jumbo loan from the Federal Housing Administration if you want an amount larger than the FHA loan limit.

Florida FHA Loan Requirements On Mortgage Insurance Premium

There is a mortgage insurance premium that you will need to pay for your FHA loan. You pay your FHA Mortgage insurance throughout the life of your loan. If you want to reduce your mortgage insurance repayment time, you will need to put down at least 10%. If you pay 10% or more on your down payment, you can expect to pay off your mortgage insurance after eleven years. Your mortgage insurance premium is usually around 1% of your mortgage.

FHA Loans For Borrowers With High Debt To Income Ratio

If you do not have a high credit score and want to buy a house, you will opt for an FHA loan. If you have a higher debt to income ratio and you don’t have enough money for a down payment, the FHA loan is perfect for you. The maximum front-end debt to income ratio is 46.9% and the back-end debt to income ratio is 56.9%.

Benefits Of FHA Loans For First-Time Homebuyers

As you may already know, at this point, getting an FHA loan comes with many great benefits. Not only do you get to purchase a home with a lower credit score, but you also get only to put down 3.5% of the home loan. There are other fantastic benefits for an FHA loan, such as having the opportunity for sellers to help with closing costs. If the seller agrees, they can pay up to 6% of your closing costs.

FHA Versus Conventional Loans In Florida On Recent Job Changes And New Job With Offer Employment Letter

If you recently changed your job, your FHA lender won’t give you any grief. Conventional loan lenders like to see candidates who have years of consecutive work experience. FHA lenders also want to see that you have a consistent flow of work to ensure that you can pay for your mortgage. If you do need to change jobs, there is no need to worry. Your FHA lender will verify your income. It is important to note that your lender may reduce your offer if your income is less with your new job.

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What is a Gift Fund and When I Might Need One? 

If you have a friend or a family member that wants to help you purchase your home, you can use their gift money. If someone gifts you cash for your down payment, you can use 100% of it for your down payment. You will need to make sure you have a down-payment gift letter from whoever gave you that money. The gift letter must contain the donor’s name, their relationship to you, and the address of your new home.

Other information needed on the letter:

  • The donor’s bank account information
  • The date the donor gave you the money
  • A statement saying the money is a gift
  • Printed name and signature of the donor
  • The exact amount of the gift

It is imperative that you have a statement that explains that the money received is a gift. Your lender wants to see that the money received does not need to be paid back. If your lender needs more information, they will let you know during your home buying process.

Conventional Loan Requirements On Gift Funds

Conventional loans also accept gift money, but there are a few extra steps.

Conventional loans also accept gift money, but there are a few extra steps. For example, the money received must be from someone close to you. This can be a child, grandparent, aunt, uncle, in-law, cousins, or partner. If you received gift money from your employer or a charitable organization, you could use that for your FHA down payment.

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Other Requirements On FHA Versus Conventional Loans In Florida

In addition to your credit score and your down payment, you must meet a few other requirements for your FHA loan. For example, you will also need a social security number and your personal tax returns. If you are self-employed, you will need to make sure that you have a current income statement and a business balance sheet.

Other requirements you will need:

  • Current check stubs
  • W-2 forms for the past two years
  • Checking and savings account information
  • Gross monthly salary
  • Address to your places of residency for the past two years
  • Names and locations of current and previous employers

When in the process of buying your home, you will need to pay for an appraisal of the property. You will also need to pay for your credit reports.

HUD Property Standards And Requirements

In addition to the qualifications that you must meet as a borrower, there are specific requirements that your home must meet. For example, the loan is only used for a primary residence. This means that you must move into the property within 60 days of closing on your loan. The property you purchase must be a single-family home that is either detached or a part of a condo or townhouse.

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FHA Loan Requirements On 2 to 4 Unit Multi-Family Homes

You can buy a multi-family property with up to four units with an FHA loan, but you must live in one of the units. The property you want to buy cannot be an investment property. If you do purchase a multi-family property, you must live in one of the units. You can rent out the other four units if you want, but your primary residence must be at that multi-family property. Unless you have a 203(k) loan, your home must pass an appraisal from the FHA. This appraisal will ensure that your home meets the property requirements set out by the FHA. You cannot use your FHA loan for a flip and fix project. The property’s title must be in your name or the name of a living trust.

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How to Choose The Best Florida FHA Lenders For My FHA Loan

There are many fantastic FHA lenders in Florida that you can choose from. You must do your research to ensure that you find the right lender for you. You can reach out to your real estate agent or friends and family for recommendations. It is always best to ask questions to potential lenders to gain a better understanding of what you need to qualify. Before you apply for an FHA loan, you will want to ensure that you know your budget.

How To Calculate Your Mortgage Payments

There are mortgage calculators online where you can plug in your expenses, savings, and current income. These calculators can tell you what you can expect to pay monthly based on what you are willing to put down and the price of your house. Once you find your lender, you should compare your pre-approval letter to other offers. This will help you compare different refinance rates and terms to ensure that you get the best deal.

Florida Loan Requirements On FHA 203(k) Loans

If you want to purchase a home and renovate it all within one single mortgage payment, you will want to look into an FHA 203(k) loan. There are two different types of FHA 203(k) loans.

Florida Loan Requirements On Limited FHA 203(k)

Applying For An FHA Loan in Florida

The limited FHA 203(k) loan application process is much easier than the standard 203(k). With the limited 203(k), your renovations or repairs must total $35,000 or less.

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Standard FHA 203(k)

As mentioned above, the standard FHA 203(k) is a bit lengthier to apply for. You will need to submit additional paperwork set by your lender before you receive approval. The repairs or renovations can exceed the $35,000 limit set by the limited 203(k), but you have to watch out for the loan limit. The total amount of your loan cannot exceed the FHA loan limit in your area.

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Florida Reverse Mortgage Requirements: What Is a HECM?

A HECM, also known as a Home Equity Conversion Mortgage, is a type of reverse mortgage that the Federal Housing Administration backs. This HECM allows older homeowners over the age of 62 with equity in their homes to withdraw a portion of that equity. The amount available to these candidates depends on the borrower and the age of the eligible non-borrowing spouse. The current interest rates and the home’s current appraised value is also taken into consideration.

Energy Efficient Mortgages

The Federal Housing Administration also backs the Energy Efficient Mortgage Program (EEM). This program allows potential homebuyers to purchase an already energy-efficient home. These energy-efficient homes are known as Energy Star-certified buildings. You can use this program to buy and remodel older homes with energy-efficient updates if you would like to. Homebuyers have the option to roll these costs into the loan without needing a larger down payment.

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Starting The Mortgage Process: Applying For An FHA Loan in Florida

If you are ready to take the next step and apply for your FHA loan in Florida, the best time to start is now! If you meet the FHA loan requirements, it’s time to get you ready for homeownership. Buying a house does not need to be a stressful experience, and we here at Capital Lending Network, Inc. understand what you need to get approved. Contact us now to learn more about what you can qualify for. Our team will not issue you a pre-approval letter unless we are sure that you are fully qualified. We are available seven days a week to answer any questions or concerns that you may have.

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How Can I Qualify For An FHA Loan In Florida With A Lender With No Lender Overlays

Capital Lending Network, Inc. is licensed in multiple states including Florida. CLN Mortgage has a national reputation for its no lender overlay on government and conventional loans business platform. We are mortgage bankers, correspondent lenders, and mortgage brokers. We have dozens of traditional and non-traditional mortgage loan programs available. Some of the most popular loan programs include no-doc mortgages, 12-month bank statement mortgages for self-employed borrowers, non-QM loans one day out of bankruptcy and foreclosure, 90% LTV jumbo mortgages, asset-depletion mortgage program, and dozens of other non-QM specialty loan programs.

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