You’re thinking about buying your first home in Florida and you’ve got a lot of questions. You want to know what programs are available to help you and you want to know about the home buying process.
That’s why we’ve developed this step-by-step guide to help first time homebuyers in the state of Florida from start to finish.
1) Florida First Time Home Buyer Programs
First, let’s check to make sure you take advantage of every Florida program for first time home buyers. Here are the options available:
Florida Housing’s First Time Homebuyer (FTHB) Program
The Florida Housing Finance Corporation is state agency with the goal to make housing more affordable for low and moderate income families. One of the programs they offer is The Florida Housing’s First Time Homebuyer Program (FTHB).
FTHB offers low interest, fixed-rate mortgages and even down payment assistance and closing cost assistance to families that qualify for the program.
Check out their First Time Home Buyer Wizard to see if you qualify for the program.
State Housing Initiatives Program (SHIP)
SHIP is offered through city and county governments and helps with down payments and closing costs.
Check to see if your local government offers SHIP here.
Florida Housing Mortgage Credit Certificate Program (MCC)
MCC is another program brought to you by the Florida Housing Finance Corporation. The program is designed to help homeowners save money for every year that they live in their home.
Every year you get to deduct 50% of your mortgage interest as a tax credit on their federal tax return. Keep in mind it’s a credit, not a deduction (awesome!)
The credit is good for 30 years or the life of the mortgage. Another great perk about the program is that income can be used to help buyers qualify for a loan or a bigger mortgage.
MCC has purchase price and income requirements, which you can find out more about by contacting a participating lender.
Local First-Time Home Buyer Programs
Local Housing Authorities
Counties and cities will sometimes offer incentives for homebuyers. Check your local housing authority to see what programs they are offering to first-time homebuyers.
For example, in the Broward county housing authority partnered with local mortgage lenders to offer 3% down payment loans and below market rates for those buying a home for the first time.
Be sure to run a google search for “(insert county name) + housing authority and research the programs they offer.
Individual Development Accounts
IDAs are savings accounts that you can set up, and if you qualify you get free financial education and a matching contribution of up to $2,000 that you can put toward a down payment or closing costs.
Federal Programs For First Time Home Buyers
Outside of the Florida state programs, there are some national programs that help first-time home buyers purchase a house.
Let’s take a look at what the Federal guys offer.
U.S. Department of Agriculture Direct Loan Program
The U.S. Department of Agriculture Direct Loan Program, also known at the “502 loan” offers loans to low income buyers in “designated rural areas.”
There are a lot of benefits to getting a USDA loan. One is that they offer below-market interest rates, have 100% financing so buyers can roll their closing costs into the mortgage (that means no money out of your pocket to close).
USDA loans are available to both first-time home buyers and repeat buyers.
Here is detailed breakdown of the USDA loan with rates and details.
The HELP Act
The HELP act expands what the Consumer Financial Protection Agency covers outside of the normal census designated “rural” areas.
If eligible, these areas may have exemptions and provisions that first-time home buyers can take advantage of. When looking into mortgages remember to ask about HELP eligibility for your area.
Hometown heroes is a national organization that offers assistance to medical personnel, educators, firefighters, police, government employees, and members of the military. Buyers can get a mortgage pre-approval which would save you about $500. They also offer $750 towards closing costs for those that qualify.
Every dollar counts so it’s definitely worth checking out.
2) Shopping For a Loan and Common Pitfalls
Now that you are read up on some programs that you can take advantage of, it’s time to break into the loan-shopping phase. In this phase it’s time to step back and evaluate your ability to buy a house.
There are ways to get a house for almost no money down with some of the programs I mentioned, but they don’t help if you can’t afford the monthly payments.
A general rule of thumb is that you shouldn’t be spending and more than 30% of your after tax income on housing. It’s also important to keep in mind that there are more expenses associated with owning a home outside of the mortgage payment.
You’ll have to cover property taxes and homeowners insurance, as well as all of the nickel and dime repairs and maintenance items that come up over the years.
On average, homeowners spend 1 to 4 percent of the value of their house annually on repairs and maintenance.
For example, if you bought a house for $200K, you should budget at least $2,000 for home repairs every year. To be safe, you would want to budget $4-5K.
That’s an extra $400 per month you’ll want to set aside on top of your mortgage payments. After you’ve taken all expenses into account, it’s time to start shopping for a loan.
Give yourself a pat on the back for making it through the worst part of being a first-time home buyer in Florida. Now we get to move on to the fun part.
Lets take a look at the top locations to buy your first house in Florida.
3) Researching Local Schools
If local schools are important to you, you are going to need to know how to quickly research the quality of the schools in the area.
A nice tool to help start your school research is greatschools.org. Simply type in the name of the county or the zip code into the search bar and look through the schools in the area. Each school is rated—mostly by parents of the kids that go to that school.
This will give you a quick, top level view of the school, but you shouldn’t stop there. You need to dig a little deeper to find out more about the reputation of the schools in a local area.
The next step is to head over to the City Data Forums and ask their community of millions of locals about their honest opinions of the schools in the area you are thinking about buying in.
Go to http://www.city-data.com/forum/florida/ and scroll through the list to find the city you are thinking about buying a home in.
Create an account and put up a post asking about the schools in the area. There are tons of locals that regularly patrol these message boards and they will be able to give you honest, personal input on the schools.
Almost all schools have their own website. Check it and try to find out more about the curriculum for whatever grades you are interested in.
If you call up the school, they may be able to email you a syllabus.
Another school research hack you can try is to do research on the career website Glassdoor. Glassdoor is normally used by prospective employees to check out reviews on a company they want to work for.
In our case, we want to see what the teachers say about what is what like to work at the school. Teacher satisfaction can be a very useful indicator on the quality of the school.
If all of the teachers were miserable when they were working there, I would run away.
Glassdoor doesn’t have reviews on every school, but many of the large ones in Florida are there.
4) When do I Need a Real Estate Agent and How to Find One
After you have researched schools and figured out how much house you can afford, it’s time to move on to the home researching. At this point, it’s time to find a good real estate agent to help you through the deal process.
When you are talking to prospective real estate agents, remember that it’s a job interview. Here is a list of some questions for ask during your interview:
Are you full time or part time?
This may seem like a bit of a throwaway question, but the answer can be important. In Florida, there are a lot of people that have decided to get into real estate because they needed something to do in retirement.
There is nothing wrong with that, but you want to keep in mind that people that are not full-time are going to have other priorities besides helping you find a great house.
How long have you lived in the area?
You are much better off with a real estate agent that has lived in the area for longer than 10 years.
The reason is simple.
They know the local builders, their quality, and how the houses have held up over the years.
You are not building a house, but the house you are buying was built by a builder at some point, and the last thing you want to do is buy a house that will give you a bunch of problems in a few years.
The longer an agent has been in an area, the more context they will have on the quality and longevity you will get out of a particular house.
It’s super important.
Get a Reference
Ask the agent to refer you to one of their previous customers, ideally a fellow first-time home buyer. If the agent is hesitant to provide this, or feels like it isn’t necessary, find another agent.
If they do provide the reference—take advantage of that and ask a lot of questions. How did the agent act when things went wrong during a deal.
So many things come up during a deal—the last thing you want is someone that can’t handle a bit of adversity.
You also don’t want a “yes” man or woman. Part of being your advocate is speaking up when they think you are making a mistake.
If You’re Still Not Comfortable after the First Meeting, Move on
If everything checked out up to this point, and you are still not comfortable with the agent after the first meeting, don’t be afraid to move on. Your gut is almost never wrong, so listen to it.
If something feels off, it probably is. Just because you met once doesn’t mean you are bound to that agent for life.
Give them consecutive feedback, and let them know you are moving on to find another real estate agent.
Don’t Rely on Zillow or Trulia Agent Reviews
Have you ever noticed that there almost no negative reviews on Trulia or Zillow? Also, notice the “featured” agents at the top of the list when you type in an area.
The “preferred” or “featured” agent on Zillow, Trulia, and other real estate websites paid the company to be put at the top of the list. It has nothing to do with performance.
Take these lists with a grain of salt and do your own research. This is the biggest purchase of your life—don’t leave any stone unturned.
5) How To Evaluate a House
Once you have a great real estate agent on your side and they have helped filter down the homes to your top choices, it’s time to start checking out the houses in person.
This is the fun part!
Once you arrive at a house, you are going to want to be prepared to evaluate it. This checklist isn’t mean to discourage you.
It’s simply meant to give you a road map
Remember, your potential neighbors will have almost as much impact on your enjoyment of your house as your actual house does!
In fact, according a study by the National Association of Realtors found that 78% of home buyers felt that neighborhood quality was more important that the size of the home. Link: http://www.realtor.org/reports/nar-2015-community-preference-survey
If the neighbors are outside, see if you can strike up a conversation with them. This will give you a preview of what it will be like to live next to them.
Besides talking to the neighbors, walk the property line and see if any of the neighbors are encroaching.
Disputes over the property line are the worst and make for a very uncomfortable situation.
If you can foresee your interactions with the neighbors being contentious, it may be better to find another house.
The most important thing about the outside of the house to remember is that it’s the cheapest thing to upgrade.
I’m not talking about the roof or the siding—I’m talking about the landscaping.
The great thing about bad landscaping is it’s easy to fix and it lowers the value of the house.
That’s just extra value for you, because you know you can make it look great for cheap with a little effort and imagination.
Check to see if there are any trees that hang close to the house. It can cost hundreds or even thousands of dollars to have trees removed or trimmed. If you see some that are becoming a problem and growing over the roof, keep in mind that one day you’ll be having to foot that bill.
The kitchen is the most expensive room in the house to remodel because the appliances aren’t cheap. Well-made appliances typically have a lifespan of about 10 years before things start to go wrong with them.
The cabinets are also an expensive item. Check the material and the condition of the cabinets. Even cheap ones will set you back about $4,000.
Open up the cabinet under the sink and look for any signs of a leak or water damage. Also make sure all of the drawers open and close properly
The bathrooms are the second most expensive rooms in the house to remodel. Are you noticing a trend here? Any rooms with water running through them are expensive to deal with.
Again check for water damage under the sink and look for calcium/rust buildup in the shower. It can get expensive if you have to replace the entire tub and shower fixture.
Living and Bedrooms
Here the main thing you want to look for is if the floor needs to be replaced. Outside of just focusing on potential repairs, it’s important to start evaluating whether or not you can visualize yourself living in this house.
Let’s look at some tips to help you see beyond the staged furniture setup to get a true sense of what you can do with a house.
Does a room seem crowded or too small. Drop everything and look up at the ceiling—it’s the best way to get a true sense of the size of the room without the furniture distorting your perception.
If everything checks out and you think this house might be the one, it’s time put on your poker face and get into negotiation mode.
6) Making an Offer and How to Negotiate
The first rule to negotiation is to understand the psychology of the seller and what kind of situation they are in.
In Florida, you are likely to come across sellers that have recently inherited the property. They might have some emotional attachment to the house or they might just want to get it off their hands.
Sometimes, small things can make people move quicker than they probably should through a deal. Maybe the HOA fees are coming due soon. Look for little clues to the seller’s willingness to sell.
Also understand what type of market you are in. If it’s a seller’s market, don’t come in with lowball offers or you’ll miss out on getting the house you want.
Your realtor should be able to guide you on market conditions and what position you are in as the buyer.
Understand that as first-time home buyer, you may not have the strongest negotiating position. About 1 out of every 4 real estate deals are done with a buyer that is paying cash for the property.
Cash can close quickly. Cash deals don’t have to meet appraisal value. Cash deals have a lot less that can go wrong. Cash is king and cash gives you the ultimate bargaining power.
Sellers will often take less of an offer from a cash buyer than they could get from someone that is using a no-money down USDA loan to buy a house.
If you are using a loan or other programs which add to the administrative burden, understand that you are going into the deal at a disadvantage. You’ll need to play the sympathy card a little bit.
Let the seller know you really love their house and that this will be the very first home that you ever own and how excited you are about it. You might think you should go into the deal hard nosed and rigid, but if you want to win in a seller’s market, you have to get the sellers sympathy.
Go ahead and make a fair offer after you have won the seller over. All things equal, you want them to prefer to sell the house to you.
Remember, this might be the house that the seller’s children grew up in. They are going to want to leave it to someone who will appreciate it.
Once you’ve come to terms with the seller on the price and have agreed to move forward with the deal, it’s time to iron out the details of the contract.
7) Home Inspections and Other Due Diligence
This is when things start to get serious for the buyer. If all of the basics check out, it’s time to take a deeper dive into the status of the house and perform your due diligence before closing.
Inspectors check out every square inch of the house to determine the integrity of the structure. The dead giveaway for a house that is not structurally sound is when you find lines throughout the house that are not level.
For example: the sides of the house, are they level or staggered? Are the doorframe and window frames square or do they look bowed or tilted? Lines that aren’t straight indicated that a foundation was either not laid properly or is beginning to shift.
That is a bad sign for a house.
Other things inspectors will look for include:
-Proper drainage away from the house
-leaks from septic tanks (but you should have caught this in your walkthrough!)
-trees / branches hanging over the house which may cause problems in the future
-siding and paint on the outside of the house is loose, chipped or falling apart.
-Curling or mold on the shingles
-Making sure there are no more than two layers of roofing
-Evidence of excess roofing cement or tar
-Rusty or loose gutters
-Chimney with cracks, properly flashed, the condition of the mortar / cement cap
-Testing for the entire electrical system and plumbing to make sure everything is in working order
-Making sure every door, window and appliance that comes with the home is in good working order
-Looking for signs of water damage and decay under sinks and in other areas with potential plumbing damage
-Heating and cooling systems work properly with good air flow and circulation throughout the house
Here is a complete list of home inspection items if you want to see the entire checklist (it’s super long)Link:
Confirm the Zoning
The title company will perform this check, so it’s not a requirement for you as the buyer to check this. However, if you want to find out for yourself, here are the steps you can take to look up the zoning for the property (warning: in some counties it can be a bit tricky, stick with it!)
Head to the county property appraiser website. Remember to look up the country the property is in so you are looking at the right website.
On the website, look for something that says something like “parcel database”. It should bring you to an overly complicated, not at all intuitive or clear to understand at all search page (it’s local government after all).
The Third Party Appraisal of the Property
If you plan on buying a house with a mortgage, the bank will get a third-party to appraise the value of the house.
The appraisal is assurance to the bank that the house is indeed worth the amount of money you are borrowing to buy it.
This is another popular drop-off point in the lifecycle of a contract.
You think a house is great. The seller is ready to sell. There isn’t anything wrong physically with the property and you start thinking this could be the one!
The appraisal comes back lower than what you and the seller expected. HUGE bummer.
Unfortunately, the appraisal system can be a bit funky and sometimes flukey. If a few people in your neighborhood let their house go for cheap, all of a sudden your house which is comparable in size and features, will be worth less money.
In many ways the appraisal system is what kept our housing market in the tank for so long. Just when prices would start to recover, people sold low and stifled the recovery.
A few years ago, a study by NAR confirmed that 35% of agents had a deal with appraisal issues within the 3 month period of the study being conducted. link:http://www.realtor.org/news-releases/2012/10/low-valuation-in-home-appraisals-causing-steady-level-of-contract-glitches
Luckily, we’ve moved past some of those issues, but it still can happen to your deal and you’ll want to be prepared for it.
If the appraisal comes in low, often the seller will compromise and come down to the lower valuation. If the seller isn’t willing to compromise, you’ll have to move on from the deal.
Review HOA Information
A homeowner’s association is a governing body of a community that sets the rules for the community. If residents do not abide by the rules set by the HOA, they can even put a lien against your house!
That’s serious stuff, so you are going to want to read up on the rules during the due diligence period.
HOA’s commonly charge a fee as well, which you must pay to be apart of the community. Make sure to add this expensive in when deciding if the house fits in your budget.
Outstanding Contracts and Warranties on Key Household Items
This is another common deal-wrecker outside of the inspection during due diligence. Throughout homeownership, things come up that need to be replaced or updated. Some big ticket items like water heaters and solar panels will be inherited by the buyer.
Solar Panels in particular are often sold to the homeowner under a contract when they are installed on the house.
This sometimes proves to be a huge pain in the neck to buyers if the seller signed into a bad or complicated deal.
Make sure before you buy you ask to see the details of any contract you might inherit as the buyer and make sure you are OK with the terms.
8) What to Expect on Closing Day
First of all, pat yourself on the back for making it to the finish line on the most important purchase of your life!
Prior to the closing the buyer should be provided with a HUD statement which is the main blueprint of money exchanging hands ,so to speak and should be looked over carefully before the closing when you are not under any pressure to hurry up–the same is true with final mortgage documents.
Closing day is the day you make the purchase official. Enjoy the moment!
A smooth closing day only lasts about one hour.
Being a first time home buyer can be an intimidating experience if you are not going into the process prepared. Follow these 8 steps and you will be much more likely to have a smooth experience.