Florida First Time Home Buyer Guide

In the last decade, Florida’s population has surged, increasing by more than 2.6 million people. This remarkable demographic shift ranks Florida as the second-highest state in the country in terms of numerical population growth, second only to Texas. Given this substantial population influx, it’s unsurprising that Florida’s housing market is experiencing considerable expansion, resulting in rising property values.

While the housing market faced challenges during the pandemic, Florida, like many other regions, is now showing promising signs of recovery, making it an attractive destination for homebuyers. This appeal is particularly pronounced for first-time homebuyers, regardless of their specific circumstances.

Purchasing a home is a momentous decision that brings with it a plethora of intricate financial terms and concepts. However, for first-time homebuyers in Florida, dedicating time to understand the market and explore available programs could lead to securing an excellent deal on their very first home. Our aim is to assist these prospective buyers in comprehending the Florida real estate landscape and identifying potential programs tailored to their needs.

Florida First-Time Home Buyer Options

Unless you and your family are financially well-off, the most likely scenario is that you’ll require a home loan, commonly referred to as a mortgage. These loans for aspiring homeowners generally fit into one of two main categories: conventional and government-backed. It’s important to note that not everyone will meet the eligibility criteria for both types of home loans. Some first-time home buyers might even qualify for multiple loan options, necessitating a decision about which one is most suitable for their particular circumstances.

Conventional Mortgages

• Financed entirely by private banks or financial companies
• Typically comes with a lower interest rate, but a better credit score often secures even lower rates
• Usually mandates a down payment, which can range from as low as 5% to as much as 20%
• Buyers must possess a minimum credit score of around 640, although this requirement can vary significantly depending on the lender

Government-Mortgage Loans

• Originates from a private bank or lender but is supported by a state or federal agency, often one of the three major agencies — the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), or U.S. Department of Agriculture (USDA). Eligibility criteria differ by agency, with terms and loan limits also varying depending on the property’s location, either county or city
• Many programs permit buyers to provide a smaller down payment, potentially as low as 3.5%, although this can also be influenced by credit scores
• Interest rates on these loans tend to be higher compared to conventional loans
• Minimum required credit scores are lower, though individuals with scores below 580 generally need to make a larger down payment
• Congress rose loan limits on FHA for 2022

Repayment options

Regardless of the entity backing it, the most prevalent form of home loan remains the conventional 30-year fixed-rate mortgage. It’s estimated that approximately 90% of U.S. homebuyers opt for this type of mortgage. However, various alternatives exist, and the most suitable one for you largely depends on your specific circumstances and plans.

Adjustable-Rate Mortgage (ARM): With ARMs, the initial phase of the loan features a fixed interest rate. Still, after a predetermined period or when a specified marker or metric, usually tied to the passage of time, is met, the interest rate adjusts. Following this adjustment, the interest rate generally increases significantly, leading to a higher monthly payment for the homeowner who continues to reside in the house. ARMs can be advantageous for those who intend to relocate before the rate adjustment, potentially saving money during the initial phase of the loan.

5/1 ARM: This variant involves a 30-year mortgage, with the buyer paying a fixed interest rate for the first five years. Afterward, the rate fluctuates annually, tethered to an economic index. This may result in lower payments under certain conditions but typically leads to an annual rise in the borrower’s mortgage payment. Once again, this loan is a suitable choice for individuals planning to sell their homes within the initial five-year period. However, it can be risky if circumstances change.

15-Year Mortgage: Largely akin to the standard 30-year mortgages, 15-year mortgages can come with either fixed or variable rates. The key distinction is that the total loan duration is halved. For borrowers weighing the choice between a 15-year and 30-year fixed-rate mortgage, the decision often translates to savings amounting to thousands of dollars in interest costs. This benefit comes at a cost, though, as it essentially doubles the monthly mortgage payment. The 15-year mortgage is a fitting option for those purchasing homes that are exceptionally affordable relative to their income.

Other terms to know

The down payment, principal, and mortgage interest represent just a portion of the financial considerations you must grasp to maximize your real estate investment. Let’s delve into some correlated terms that are essential for Florida homebuyers to comprehend.

Mortgage Insurance: Typically, this becomes a requirement when the buyer contributes less than 20% of the down payment. It ceases once the house’s value surpasses the outstanding loan amount by more than 20%. Lenders are legally obligated to discontinue private mortgage insurance when the loan balance reaches 78% of the initial purchase price or when the buyer completes the 15th year of a 30-year mortgage.

Equity: Equity signifies the difference between your home’s value and any remaining mortgage balance. For instance, if your home is appraised at $150,000, and your outstanding loan is $70,000, your equity in the property amounts to $80,000. Typically, equity becomes pertinent when selling or refinancing your home. This underscores the significance of making a substantial down payment, whenever feasible. As one of the most substantial investments you’re likely to make, your home’s equity accumulates over time. You can augment your equity through two primary means: paying down your loan and enhancing your home’s value. Real estate generally appreciates over time, although market conditions can occasionally lead to depreciation.

Closing Costs: Both buyers and sellers are expected to shoulder one-time expenses, generally ranging from 3% to 7% of the home’s purchase price. In Florida, these costs encompass a range of expenses such as lender fees, real estate commissions, title fees, inspections, and various other charges.

Housing Market in Florida

Over the past decade, Florida’s population has expanded by the second-highest number among all states, with more than 2.6 million people, according to estimates from the U.S. Census Bureau. That’s second only to Texas and nearly a half-million more people than California, which remains the largest state by population. Not only does Florida rank second for the total number of new residents, but it’s also fifth by the percentage of growth, 14% since 2010.

Top 10 states by numeric growth, 2010-2020

All of those people need some place to live, which has helped push home values higher and higher in Florida, according to Zillow data. In fact, the median home value in Florida has risen by more than 27% since 2016, the 15th-highest rate of growth in the country.

Top 10 states by year-over-year increase in median home value, 2019-2020

Florida joins three other Southern states in the top 15, a list that’s dominated by Western states, which take up all of the top five spots. Adding to rising home values are increasingly competitive housing markets in cities and metro areas across the state. For example, just a couple of years ago, the typical home in Jacksonville was on the market for more than a month before it sold (37 days, to be exact); today, the median time to a pending sale in Jacksonville is just 11 days. All other major metro areas with available data have seen this metric fall as well.

Percentage change in median days to pending sale by metro area, 2018-2020

Cities and towns within broader metro areas are largely responsible for rising home values across the state of Florida. In fact, all 25 of the cities with the highest increase in median home value over the past five years are in metro areas, with the Miami-Fort Lauderdale metro claiming eight of the 25 and Tampa-St. Petersburg claiming another nine.

Top 25 Florida cities by percentage change in median home value, 2016-2020

Resources for Florida Home Buyers

Prospective first-time homebuyers in Florida can choose from a variety of financing options to facilitate their home purchase. The suitability of specific programs depends on the property’s location and the individual financial situation of each family. Fortunately, a multitude of loan and down payment assistance programs are accessible throughout the state, extending to numerous cities in Florida.

City of Miami: First-time buyers in Miami can qualify for a 0% interest rate deferred loan to help with down payment and closing costs depending on their income and the purchase price of the property.

City of Orlando: A down payment assistance program in Orlando provides no-cost loans to some first-time home buyers that will be forgiven after the 10-year loan period, assuming the borrower doesn’t sell the home before then. Eligibility depends on income, and the maximum amount available depends on the purchase price of the home, but buyers must be able to contribute at least $1,000 toward down payment and/or closing costs to qualify.

Florida Housing Finance Corp: This state agency provides several down payment assistance programs to buyers across the state that provide low-cost second mortgages that may be helpful to borrowers who don’t have the cash on hand to make a down payment. Each of the three programs have specific terms. For example, borrowers in the FL Assist program can defer a second mortgage up to $7,500 that they use as a down payment until they sell their home, while the HFA Advantage PLUS Second Mortgage program provides buyers with low-rate second mortgages that are forgiven at a rate of 20% per year over their five-year terms.

Federal Housing Administration (FHA): Loans backed by the FHA and offered through private lenders are a popular option, particularly for lower-income borrowers and/or those with medium to low credit scores. Loan limits vary across the country, and even by county. In most of Florida, the limit for an FHA-backed mortgage on a single-family home is $331,760, but it’s typically higher in counties that lie partially or entirely in metro areas. So that means in counties like Duval and St. Johns, part of the Jacksonville metro area, the limit is $371,750. Before checking all your options, be sure to consider the FHA limits in your Florida county.

U.S. Department of Agriculture (USDA): The USDA Rural Development Single Family Housing Direct Loan Program provides loans to purchase homes in rural areas and other small cities and towns, but the eligibility limits depend on household income and size. Here’s a look at the limits to be considered a low-income, four-person family in metro areas and counties in Florida:

• Cape Coral-Fort Myers: $55,100
• Crestview-Fort Walton Beach: $62,300
• Deltona-Daytona Beach-Ormond Beach: $51,900
• Gainesville: $57,050
• Homosassa Springs: $44,700
• Jacksonville: $56,900
• Lakeland-Winter Haven: $47,050
• Miami-Fort Lauderdale-West Palm Beach: $71,300
• Naples-Immokalee-Marco Island: $65,850
• North Port-Sarasota-Bradenton: $61,200
• Ocala: $44,000
• Orlando-Kissimmee-Sanford: $58,150
• Palm Bay-Melbourne-Titusville: $55,350
• Panama City-Lynn Haven-Panama City Beach: $55,500
• Pensacola-Ferry Pass-Brent: $55,250
• Port St. Lucie: $55,600
• Punta Gorda: $49,450
• Sebastian-Vero Beach: $55,700
• Sebring: $42,250
• Tallahassee: $58,150
• Tampa-St. Petersburg-Clearwater: $56,250
• The Villages: $57,050
• Bradford County: $47,850
• Calhoun County: $42,250
• Columbia County: $47,700
• DeSoto County: $42,250
• Dixie County: $42,250
• Franklin County: $44,300
• Glades County: $42,250
• Hamilton County: $42,250
• Hardee County: $42,250
• Hendry County: $42,250
• Holmes County: $42,250
• Jackson County: $43,750
• Lafayette County: $45,700
• Levy County: $42,250
• Liberty County: $45,350
• Madison County: $42,250
• Monroe County: $80,550
• Okeechobee County: $42,250
• Putnam County: $42,250
• Suwannee County: $42,250
• Taylor County: $42,250
• Union County: $45,850
• Washington County: $42,250

VA: Military veterans can secure loans through Veterans Affairs for any amount, but the agency has limits on the amount it will back. Florida is usally one of the highest ranked states for VA first time home buyer loans. These limits vary by state and county and are based on the size and price of the home in question. For most single-family homes in Florida, the limit is $548,250, with the exception of Monroe County, where the limit is slightly higher — $608,350. Monroe County is home to Key West.

Conclusion

Purchasing your first home is a very big (and admittedly ) step. That’s why it’s so important for first-time buyers in Florida to do their homework, not just on the house they want to buy but the financial aspects of making a smart purchase.

Florida Home News

Florida Insurance Crisis Grows

New Home Buyers Helped in Florida and Louisiana

Florida House Buyers Struggle to Compete

References

• Zillow, Housing Data, Zillow Home Value Index by State and City, Median Days to Pending. (2020).
• U.S. Department of Agriculture, Rural Development Single Family Housing Direct Loan Program, Adjusted Income Limits. (2020).

Share on Facebook

Tweet

Follow us