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Lending Programs for First Time Home Buyers in Florida

  • Corey
  • Sep 23, 2016

Distressed properties in Florida are widely available, accounting for 8.4 percent of total real estate sales in May of this year, and those looking to enter the market should recognize the savings they provide as a starter home. However, homes in neighborhoods with amenities like good schools, proximity to restaurants and entertainment, and low crime can be expensive. Fortunately, there are several financing options offered by the State and other lending programs to get you in your new home fast and with a low down payment. In fact, for some programs you may be able to pay as little as $2,500 towards your first home.

Renovating for Value

Florida, like the most of the country, has a shortage of homes and leaving many to seek ‘fixer-uppers’ to save on price and use the extra funds to renovate the property.

Broward County had 5,396 active listings at the end of July, a decrease of 12 percent compared with a year ago, according to figures from the Greater Fort Lauderdale Realtors.

Luckily for prospective first time home buyers a Federal Housing Administration loan is ideal for those wanting to live in a home in need of renovation and repair with a mortgage of up to $345,000. This type of loan will provide ample funding for necessary repairs like new roofing or knocking down walls to open space.

Of course the perfect home is a new construction, but when homes are in short supply and those that are available are unaffordable for first time home buyers, it’s best to start small and use a property that requires modest renovation to build wealth that will one do go towards your dream home.

Types of Loan for First Time Home Buyers in Florida

You don’t have to settle for a home in need of renovation if you can find an affordable property that has everything you want. There are several types of loans available to first time home buyers in the state that come with a low interest rate.

First Time Home Buyer Program: The FTHB program offers a low-fixed rate 30-year mortgage for eligible applicants. Also known as ‘Florida First,’ can be obtained through a network of participating lenders. The loan is primarily for first time home buyers looking to move into a federally designated target area. However, buyers must meet requirements for amount of income and the home be within the purchase price criteria. Buyers must also have a credit score of at least 640 and pay a minimum of $1,000 towards the home. If determined eligible, then a six to seven-hour homebuyer education class must be completed.

Local State Housing Initiatives Partnership (SHIP): Your county or municipal government can provide down payment and closing cost assistance to borrowers that meet their criteria. SHIP is primarily for families with low-to-moderate income in order to make housing more affordable. The loan is provided through a partnership between finance corporations like Florida Housing (who administer the funds) and local governments (amount is determined by population) to preserve affordable housing and multifamily housing in the state. SHIP is available in all 67 counties in Florida, but a minimum of 65 percent of funds must go towards home ownership activities. The remaining funds can be used to fund emergency repairs, renovation, down payment as well as closing cost assistance.

Federal Housing Administration Loan (FHA): An FHA is a mortgage insured by the federal government that offers an attractive interest rate with flexible eligibility requirements. To acquire a mortgage with a low down payment (3.5 percent), you must have a credit score above 580. The absolute minimum to qualify is a score of 500, but you will have to make a down payment of 10 percent. The funds provided allow for some of the closing costs, such as appraisal, credit report and title expenses to be covered. However, lenders will typically charge a higher interest rate if they offer to cover closing costs. Keep in mind, the FHA is not a lender, but an insurer and not all FHA-approved lenders offer the same interest rate and costs. You can shop for FHA-approved lenders here.

Paying the Down Payment

Having to save for a 20 percent down payment isn’t easy. For example, if you’re looking to buy a home for $350,000, the down payment would be $70,000; that’s more than the average Floridian makes in a year. However, first time home buyers can pay as little as 3 percent for a down payment and sometimes no money down. If you don’t make a 20 percent down payment, then purchasing private mortgage insurance will be required, which protects the lender in the case of default on the loan. The rule of thumb is the lower the down payment, the higher the mortgage insurance; your credit score also determines how much needs to be paid.

To determine the best course of action for your financial situation, it’s recommended that you meet with a mortgage officer or broker before starting your home search. They will be able to lay out all the costs and help to weigh your options in order to determine how large of a down payment can be paid.

Regardless of the amount put towards a down payment, it is imperative that you begin to save well ahead of the projected date you wish to move. Despite being able to pay a low down payment or none at all, there is still closing costs that will have to be paid out-of-pocket.

Buying a home is stressful. Finances and personal situation all need to be in order and require significant planning; this includes where you’re going to live, price range and how much of a down payment to make. A starter home is not meant to be a ‘forever’ home, but a sound investment for your future. Renovations may be necessary if the home is not a new build, but after all the hard work, you will reap the rewards of added value. There are several financing options available to first time home buyers and all should be considered carefully with the guidance of a reputable broker.

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