Over the past decade, Florida has expanded by more than 2.6 million people, the second-highest numerical population increase in the country, behind only Texas. So it shouldn’t come as a surprise that the state’s housing market is also expanding and values are rising.

The coronavirus pandemic has put a damper on housing markets across the country, and while Florida is no exception, signs are pointing toward the state being an excellent option for home buyers, particularly for those purchasing their first homes.

Regardless of their circumstances, buying a home is a huge decision, and it’s one that comes with a bevy of confusing financial terms and vocabulary. But for first-time home buyers, doing their homework could mean getting a great price on their very own home. We’ll help first-time home buyers in Florida understand the market and what programs might be available for them.

Florida First-Time Home Buyer Options

Unless you and your family are flush with cash, you’ll probably need to get a home loan, also known as a mortgage. These loans fall into two broad categories — conventional and government. Not every person will be eligible for each type of loan, while some first-time buyers may qualify for more than one type of loan and will need to make a decision about which is best for them.

Conventional loan

  • Funded entirely by private bank or finance company
  • Most often carries a lower interest rate, but better credit scores will usually secure lower interest rates
  • Usually requires a down payment, which ranges from as little as 5% to as much as 20%
  • Buyer must have a credit score of at least 640, though this varies dramatically depending on the lender

Government-backed loan

  • Issued by a private lender or bank but backed by a state or federal agency; most often that’s one of three major agencies — the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) or U.S. Department of Agriculture (USDA). Eligibility varies by agency, and terms and loan limits are also variable by the county or city where the property is located
  • Most programs allow buyers to provide a lower down payment, as low as 3.5%, though this also depends on credit scores
  • Interest rates on loans are higher than for conventional loans
  • Minimum credit scores are lower, though borrowers with scores lower than 580 will usually have to make a higher down payment

Repayment options

Regardless of who backs it, the most common type of home loan is a standard 30-year, fixed-rate mortgage. It’s believed that about 90% of home buyers in the U.S. use this type of loan, but there are other options that may be better depending on your individual circumstances and plans.

ARM: With adjustable-rate mortgages, the initial period of the loan has a fixed interest rate, but the rate changes after a marker or metric established by the loan has passed, most often a certain amount of time having passed. After that time, the interest rate generally will rise dramatically and the buyer would have a higher monthly payment if they were to remain in the house. But for many people who plan to move before the rate changes, an ARM can help them save money early on in the loan.

5/1 ARM: This is a type of 30-year mortgage in which the buyer pays a fixed interest rate for five years, after which the rate varies annually in connection to an economic index. This could mean a lower payment in some circumstances, but it usually means the borrower will see their mortgage payment rise every year. Again, this type of loan is ideal for people who plan to sell their home before five years have passed, though this could be risky if your plans change.

15-year: Mostly identical to standard 30-year mortgages, 15-year mortgages can come with fixed or variable rates, but the total length of time to pay the loan off is cut in half. What that means for a borrower choosing between a 15-year and 30-year fixed-rate mortgage would probably be thousands of dollars in savings on interest costs, but at a price — essentially doubling their monthly mortgage payment. This is an ideal option for borrowers purchasing homes that are extremely cheap relative to their income.

Other terms to know

The down payment, principal and interest on your mortgage aren’t the only financial terms you need to understand to make the most of your investment. Here’s a look at some related terms Florida home buyers should know.

Mortgage insurance: This is usually required if the buyer pays less than 20% for a down payment, and it will go away when the value of the house exceeds the remaining loan amount by more than 20%. Lenders are legally required to eliminate private mortgage insurance after the balance of the loan reaches 78% of the original purchase price or when the buyer has reached the 15-year point of a 30-year mortgage.

Equity: The value of your home minus any remaining mortgage balance is the amount of equity you own. So if your home is worth $150,000, and you owe $70,000, your equity in the property is $80,000. Equity typically comes into play when selling or refinancing your home, and this is a big reason why making a healthy down payment, if that’s an option for you, is so important. As the biggest investment you’ll probably make in your life, there are many ways to use the equity that builds up in your home over time. There are two ways to increase your equity — pay down your loan and increase the value of your home. Real estate tends to appreciate over time, though it’s also possible for homes to lose value depending on market conditions.

Closing costs: Buyers and sellers both are expected to pay one-time fees, usually between 3% and 7% of the purchase price of the home. For Florida buyers, this covers things like lender fees, real estate commission, title fees, inspections, and more.

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

Texas 3,738,767
Florida 2,634,411
California 2,162,860
North Carolina 926,526
Georgia 904,836
Washington 870,397
Arizona 864,980
Colorado 709,665
South Carolina 512,402
Virginia 510,902

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

Idaho 55.4%
Utah 41.1%
Washington 40.5%
Nevada 36.5%
Arizona 36.4%
Michigan 32.7%
Tennessee 31.9%
Georgia 31.1%
Indiana 29.3%
Ohio 29.1%
Maine 29.1%
Wisconsin 28.2%
North Carolina 28.0%
New Hampshire 27.7%
Florida 27.3%

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

Jacksonville -70.3%
Tampa -60.0%
Daytona Beach -58.3%
North Port-Sarasota-Bradenton -57.1%
Orlando -54.2%
Lakeland -52.4%
Miami-Fort Lauderdale -37.5%
Fort Myers -25.0%

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

Eaton Park 110.7%
Combee Settlement 91.5%
Eatonville 82.6%
Tangelo Park 81.8%
Gladeview 80.5%
East Lake-Orient Park 73.7%
Brownsville 71.6%
Okahumpka 70.9%
Palm River-Clair Mel 69.6%
Sky Lake 69.4%
North Brooksville 69.0%
Holiday 68.2%
Pinewood 67.2%
Roosevelt Gardens 66.7%
Port Richey 65.6%
Nobleton 65.6%
Opa-locka 65.4%
University 65.4%
Pine Hills 64.8%
Ridge Manor 64.2%
Homeland 62.6%
West Little River 62.5%
Boulevard Gardens 61.3%
Mangonia Park 61.1%
Masaryktown 60.4%

Resources for Florida Home Buyers

First-time home buyers in Florida have several options for securing the financing necessary to make their home purchase, though which programs are best will depend on where the home is located and each family’s unique financial circumstances. But there are many loan and down payment assistance programs available across the state and in many cities across 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. 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.

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