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florida first-time home buyer programs

The process of purchasing your first home can be daunting and expensive, and it will likely include many financial situations you’ve never encountered. Luckily, the federal and Florida state governments have stepped in and created programs specifically for first-time home buyers. Even if you don’t have much to put toward a down payment, or you need a low interest rate, these loans and mortgage programs are great options that are worth looking into. If you want some help ensuring that you’ve made the right mortgage choice, the SmartAsset matching tool can pair you with as many as three financial advisors in your area.

Federal First-Time Home Buyer Programs

FHA Loans

Pros – Low down payment requirements
– Don’t need a high credit score for approval
Cons – Larger down payment needed for those with a credit score beneath 580
Eligibility – As little as a 3.5% down payment
– Credit score must be 500 or above
Best For – Those who don’t have a great credit history and money for a down payment

The Federal Housing Administration of the U.S. federal government backs FHA loans, though you’ll actually apply for one through an outside lender. These mortgages are a fantastic option for anyone looking to purchase a first home, namely because you’ll only need to put 3.5% of your new home’s value at the time of purchase. Compare this to a conventional loan that requires a 20% down payment, and the benefits become clear.

However, to receive this perk in its full glory you must have a FICO® credit score of 580 or higher. If not, you’ll be required to make a 10% down payment, which still represents a partial upgrade over a conventional mortgage. But even with this credit score requirement, an FHA loans falls under the category of easier-to-get mortgages.

VA Loans

Pros – Can have up to 100% loan coverage of your home’s value
– Usually come with lower closing costs than conventional loans
– No private mortgage insurance
Cons – The application process can be drawn out
– Must pay a VA funding fee
Eligibility – Must be a current or former military member, or a member’s spouse or another eligible beneficiary
– Must have a credit score of 620 or higher
Best For – Veterans with little monthly income and savings for a comfortable down payment

The Department of Veterans Affairs insures VA loans, but third-party mortgage lenders actually hand them out. These were created to help veterans who may have had enough monthly income to afford a mortgage but not enough savings to back up a down payment. In turn, VA loans do not call for any sort of down payment, meaning your new home’s value can be completely covered by your mortgage. This is essentially impossible to replicate outside of a VA loan, making it all the more valuable of a proposition.

In most situations, you need a 620 FICO®credit score to secure an approval for a VA loan. On top of this, you need to pay a VA funding fee, which will range anywhere from 1.25% to 2.4% of your home’s value depending on whether or not you choose to pay a down payment.

Aside from the funding fee, there’s almost no other extraneous costs to deal with on a VA loan. As a matter of fact, you won’t have to pay the typically obligatory private mortgage insurance because the government will back that half of your risk. You’ll also likely find that your closing costs will be cheaper than conventional and other mortgages, which should help you shore up your finances in the short term.

USDA Loans

Pros – Veterans with little monthly income and savings for a comfortable down payment
Cons – If you qualify for a conventional mortgage, you can’t get one
Eligibility – Cannot make more than 115% of the adjusted U.S. median income
– Must purchase a home within an eligible rural area
Best For – Low-to-mid income Americans looking to live in a rural or suburban area

A United States Department of Agriculture, or USDA, loan is legally known as a “Section 502 Single Family Housing Guaranteed Loan Program.” These mortgages are specifically intended to attract borrowers to move to rural, or at the very least semi-rural, places around the U.S. Simply find a single-family home that’s approved by the USDA to be eligible for a loan, and you’ll be free to apply.

Perhaps the most attractive feature of this mortgage is the fact that it completely eliminates the need for a down payment. But if your credit score falls a bit lower on the FICO® spectrum, you may have to pay a down payment of around 10%.

To make things even better, a USDA loan doesn’t require applicants to have a strong, or even decent, credit score and history. However, because of this, you will not be eligible for a USDA loan if your income level is higher than 115% of the current U.S. median income or you have qualified for a conventional loan.

Good Neighbor Next Door Program

Pros – Get a flat 50% discount on the value of your new home
– After three years, you can sell the home and keep all equity
Cons – Not available to most people and in most areas
– You’re required to live in the home for at least three years following purchase
Eligibility – Must be a police officer, firefighter, emergency medical technician or a pre-K to 12th grade teacher
Best For – Teachers or emergency personnel with little in savings

The Good Neighbor Next Door Program is one of the more distinctive federal mortgage offerings on the market. It’s in place solely for emergency personnel and pre-K through 12th-grade teachers. Although not technically a loan, it allows these individuals to receive a 50% discount of the purchase price of a new home. To actually pay for the home, you could get a conventional, VA or FHA mortgage or pay cash.

There are some preconditions you must follow in order to remain eligible for this program, though. In order to save half off your home, it must be located within a “revitalization area” as titled by the Department of Housing and Urban Development (HUD). Furthermore, you must agree to make it your primary living residence for at least the next three years. The good news is that if you meet this term, you can sell the home if you choose and hold onto any equity and profit.

Fannie Mae/Freddie Mac

Pros – Very low down payment stipulations
– Little to no credit needed for approval
– Many loan styles available
Cons – Could come with higher interest rates
Eligibility – In some cases, no income requirements in underserved areas
Best For – Anyone who is looking for a low down payment loan option, but doesn’t qualify for any of the above options

Freddie Mac and Fannie Mae are mortgage lenders that were created by the federal government, and each have a number of first-time home buyer options. While they’re technically two different entities, they offer very similar benefits, each of which are more than suitable for anyone buying his or her first home.

The HomeReady® loan from Fannie Mae need only be accompanied by a 3% down payment. This makes it a great choice for anyone who’s strapped for cash, has a FICO® credit score as low as 620 and makes an income at or near the U.S. median. With a HomeReady® loan, you must have private mortgage insurance at the time of purchase, but once you’ve accrued 20% equity in your new home, you can cancel it.

On the other hand, Freddie Mac offers Home Possible® mortgages, which come in two variations: “Home Possible: 95% LTV” and “Home Possible Advantage: 97% LTV.” LTV stands for loan-to-value, indicating that your down payment will only have to be either 5% or 3%, respectively. The Home Possible loan comes in 15- to 30-year fixed-rate and 5/5, 5/1, 7/1 and 10/1 adjustable-rate terms, along with the aforementioned cancellable private mortgage insurance. You also will not need any credit history for this loan. The Home Possible Advantage mortgage is essentially the same, only it does have some level of credit requirements and only comes in fixed-rate variations.

NADL

Pros – Minimal credit score requirements
– No down payment and no private mortgage insurance
– Cheap closing costs
Cons – Limited group of eligible borrowers
Eligibility – Home must be located on allotted lands, Alaska Native corporations, Pacific Island territories or federally-recognized trusts
Best For – Native American veterans that lack money for a down payment

Native American veterans and their spouses can apply for a Native American Direct Loan (NADL) for their new home. This VA-backed mortgage comes with many perks, but it most notably has a 0% down payment and set interest rate. Eliminating the need for a down payment opens the door for many more individuals and families to step into a new home. This rate currently sits at 4.5%, though that is subject to change based on movement within the market and Prime Rate.

As far as credit conditions go, NADLs call for very little, so don’t get discouraged if you have a weak credit history. You also will not have to purchase private mortgage insurance, which is a perk that extends from normal VA loans. In an effort to cut down on the extra expense that closing costs can create, the VA has significantly lowered these fees associated with NADLs.

Florida First-Time Home Buyer Programs

Florida HFA Preferred Conventional Loan Program

florida first-time home buyer programs

Pros – Cheap mortgage insurance premiums
– Automatically qualifies borrower for an Assist Loan
Cons – No direct down payment benefits
Eligibility – Solely for first mortgages
Best For – First-time home buyers looking to save on insurance

The Florida Housing Finance Corporation — HFA Preferred Conventional Loan is a 30-year fixed-rate mortgage that is great for anyone in need of cheaper private mortgage insurance for their new home. In theory, this will leave you more financial room to take care of other fees, such as closing costs.

Although there is no direct down payment aid, you may qualify for the Florida Assist Loan which can be had in addition to this mortgage. However, to get the Preferred Conventional Loan, it must be utilized as a first mortgage on a home.

Florida HFA Preferred 3% PLUS Conventional Loan Program

Pros – Immediate qualification for HFA Preferred Grant helps shrink burden of down payment
– Lowered insurance costs
Cons – Only comes as a 30-year loan
Eligibility – Must be your first mortgage
Best For – Anyone looking for down payment assistance

Florida HFA’s Preferred 3% PLUS Conventional Loan is slightly different than its counterpart. This mortgage option comes with both reduced mortgage insurance premiums, as well as direct down payment assistance. This will come in the form of an HFA Preferred Grant, which you will not have to pay back. It is a 30-year fixed-rate loan.

Similar to the above loan, the HFA Preferred 3% PLUS Conventional Loan has to be your home’s first mortgage.

HFA Preferred Grant

Pros – Doesn’t have to be repaid
– Can help you pay your down payment/closing costs
Cons – Will not apply to all borrowers
Eligibility – Must be applying for an HFA Preferred PLUS loan
Best For – Those who want a bit of extra financial help

While not a loan, the HFA Preferred Grant offer an opportunity for Florida residents to get essentially free financial assistance. Grants do not have to be repaid, and it can be as large as 3% of your home’s value. Depending on what you need help paying for, this grant can be utilized to take care of either your down payment or any associated closing costs.

Although this comes with the Preferred 3% PLUS Conventional Loan, other applicants will find it a bit more difficult to qualify for than most other mortgages.

Florida Assist Loan Program

Pros – As much as $7,500 in down payment assistance
– Payments are deferred until first loan is paid off or it’s not your primary residence
Cons – Will extend your repayment process longer than your original loan
Eligibility – Must have an initial mortgage to apply this to
Best For – Anyone who cannot afford a normal down payment

For further down payment aid, Florida offers the Assist Loan. This can total as much as $7,500, but is required to be repaid, unlike the grant above. There is no interest on this mortgage, however, and you are not required to begin making payments until either you refinance, you pay off your first mortgage or the home’s loses priority as your primary residence.

Though many mortgage applicants will likely be ecstatic with any form of assistance, this loan will make your repayment process longer than it would be with just your first loan. Also, unless you have a first mortgage, you’ll remain ineligible for the Assist Loan.

Florida Military Heroes Program

Pros – Low interest rates
– Borrowers qualify for the Assist Loan program
Cons – Limited applicant qualifications
Eligibility – Must be active-duty military or a veteran
– Can only be a first mortgage
Best For – U.S. military members

The Florida Military Heroes program allows those currently in the military and veterans special mortgage deals. First and foremost, they’re paired with significantly lower interest rates than typical home loans. On top of this, though, you’ll also qualify for the Assist Loan, which will provide down payment assistance in the form of an up to $7,500 second mortgage.

Because of the military-centric nature of these loans, they don’t apply to the vast majority of the Florida population. A Military Heroes loan can also only be for a first mortgage.

Florida Housing Mortgage Credit Certificate Program

Pros – Can reduce your federal taxes up to $2,000/year from mortgage interest paid
Cons – Limited qualifications
Eligibility – Most first-time home buyers will qualify
Best For – Those who are happy with their loan, but want to save on taxes

A Florida Housing Mortgage Credit Certificate is not a direct mortgage program, but it will help first time home buyers and certain veterans save on their annual federal income taxes based on how much they pay in mortgage interest. This is limited to up to $2,000 a year, as you can claim anywhere from 10% to 50% of your interest payments for the year.

Tips to Incorporate Your New Mortgage Into Your Financial Life

florida first-time home buyer programs

  • Just because you qualify for one of the above first-time home buyer programs and it seems like the perfect fit doesn’t mean that it actually is. When it comes to finding a mortgage, it’s always best to do more research than less, if possible. So be sure to check all lenders, interest rates and down payment stipulations to ensure you’re ending up with the most beneficial situation.
  • Keeping your money in order when you introduce a monthly mortgage payment into your life is tougher than it might look. To help maintain a strong balance within every facet of your finances might require some professional help. If this sounds like something you’re interested in, the SmartAsset financial advisor matching tool has the ability to set you up with financial advisors in your area that can handle your needs.

Photo credit: ©iStock.com/mphillips007, ©iStock.com/monkeybusinessimages, ©iStock.com/JohnnyGreig

Chris Thompson, CEPF® Chris Thompson is a retirement, savings, mortgage and credit card expert at SmartAsset. He has reviewed hundreds of credit cards and loves helping people find the one that best matches their financial needs. Chris is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. He graduated from Montclair State University where he received the Journalism Achievement Award. Chris’ articles have been featured in places like Yahoo Finance, MSN and Bleacher Report. He lives in New Jersey and is a Mets, Jets and Nets fan.
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