First-Time Homebuyer Programs in Florida

Purchasing your first home can feel both exciting and overwhelming, especially if it’s your first time going through the process. Fortunately, there are several programs in Florida that can help you.

MoneyGeek's review of several first-time homebuyer programs such as zero-down-payment loan programs, low-down-payment loan programs and Florida homebuyer programs will help you determine what makes the most sense for your situation.

First-time homebuyer programs provide financial assistance to aspiring first-time homeowners. The programs are usually state- or city-specific, and they offer different types of assistance, including loans, grants and tax credits.

These programs may or may not require a down payment — the initial amount of money you put towards the cost of a home. Typically, a higher down payment will reduce the cost of your monthly payments and vice versa.

Generally, there are four main types of home loans: VA loans, USDA loans, FHA loans and conventional loans, all of which have their pros and cons. Meanwhile, Florida Housing programs are specific to its residents only.

Ultimately, the best homebuyer program for you depends on your credit history, down payment amount and the type of property you're looking for.

A zero-down payment loan program eliminates the need for a down payment from the borrower. It allows you to take out a mortgage without having to come up with a lump sum of cash upfront. There are two types of zero-down-payment loans: USDA loans and VA loans.

USDA loans are a type of zero-down-payment loan available to individuals who live or work in rural areas of the United States. The loans are backed by the federal government and offered by the U.S. Department of Agriculture.

There are three types of USDA loans available:

• The Section 502 Direct Loan Program provides direct loans to low- or very-low-income aspiring homeowners.
• The Section 502 Guaranteed Rural Housing Loan helps select private lenders provide loans to low- and moderate-income applicants.
• The Section 504 Home Repair program helps homeowners finance home repairs, improvements and upgrades.

With USDA loans, borrowers pay a guarantee fee of 2% of the entire loan amount. This cost, however, does not have to be paid in advance; it can be lumped into the loan amount.

To qualify for a USDA loan, one must have a minimum credit score of 640, a maximum debt-to-income (DTI) ratio of 41%, an employment record of at least two years and the willingness to go through a rigorous underwriting process.

VA home loans are mortgages backed by the Department of Veterans Affairs and are offered to veterans, active duty military, National Guard members, Reservists and surviving spouses. With a VA Loan, you don’t need a down payment or private mortgage insurance (PMI) because VA guarantees the loan.

VA loans have several benefits, including no minimum credit score requirement and reduced rates in comparison to conventional loans. Additionally, with these loans, the seller is responsible for covering closing costs.

There are various types of VA Loans available, such as a first mortgage on a primary residence, a second mortgage on a primary residence, a mortgage on a secondary/rental property, refinancing, construction loans and reverse mortgages.

If you don't qualify for a zero-down-payment loan, consider low-down-payment loans which allow you to purchase a home for less than a 20% down payment. The two types include the FHA home loan and the conventional home loan.

Fannie Mae and Freddie Mac are private agencies that provide the financing for most U.S. mortgages, helping to make homeownership more affordable.

Fannie and Freddie loans, also known as conventional loans, are not government-backed, but they may comply with federal loan requirements. There are two types of conventional loans:

• Conforming loans: A conforming loan is one that meets the requirements set by Fannie Mae and Freddie Mac.
• Non-conforming loans: These are higher risk loans because they don't meet Fannie Mae and Freddie Mac's requirements; typically these have higher interest rates than conforming loans as an incentive for lenders to take on the additional risk.

The minimum credit score to be approved for a conforming loan is 620 and non-prime mortgages are available to those with credit ratings as low as 500. Since different lenders have different requirements, you should check with your lender to find out what their guidelines are before applying.

FHA loans are mortgages that are guaranteed by the Federal Housing Administration (FHA). These loans are originated by private lenders but are guaranteed by the FHA and follow the agency's guidelines and requirements.

FHA loans are great for first-time homebuyers, as they allow down payments as low as 3.5% of the purchase price and have a low-interest rate. They also offer more flexible underwriting guidelines than other types of mortgages, which means you can buy a house with less cash on hand upfront.

To qualify for an FHA loan, you need a minimum FICO score of 500, a maximum debt-to-income ratio of 56.9% and a minimum down payment of 3.5%.

FHA 203(k) loans allow homebuyers to purchase and repair an older home under a single mortgage.

The loan covers various rehabilitation costs, including structural alterations or reconstruction, major landscape work, accessibility improvements and energy conservation improvements.

In addition, the program has low-down-payment requirements for qualified borrowers and similar requirements to those for an FHA loan.

While there are several national homebuyer programs, Florida offers a variety of programs to help first-time homebuyers in the state.

First-time homebuyers can take advantage of Florida Housing's First Time Homebuyer (FTHB) Program to get a 30-year fixed-rate first mortgage loan from participating lenders and financial institutions around the state. Borrowers who qualify for Florida Housing's second mortgage program may receive funds to cover both the down payment and closing costs.

Prospective first-time homebuyers can contact various community development block grant (CDBG) program providers in Florida and compare offers and rates to determine the best option.

HUD provides statewide and regional homeownership assistance programs for Florida homebuyers. These include the Affordable Housing Program (AHP), Housing Finance Authority (HFA), Habitat for Humanity and USDA Rural Development.

If you're a first-time homebuyer, the process of purchasing a new home can be overwhelming. MoneyGeek answered the most frequently asked questions to help put prospective buyers at ease.