Buying a home in FloridaBuying a home in Florida isn’t much different from buying one anywhere else. But there are a few idiosyncrasies to look out for.
Property tax detailsFirst off, as you plan for your ongoing expenses as a Florida homeowner, don’t rely on the seller’s property tax bills as a guide to what your tax payments will be. In Florida, a current homeowner’s tax bill can increase by only so much per year. But when a home gets a new owner — in this case, you — the local taxing authority has an opportunity to realign the home’s taxes with the property value. This means your bill could be significantly higher than the current owner’s bill. The good news? After this initial adjustment, your taxes won’t increase much year after year. In addition, if you’ll be a full-time resident at the home you’re buying, you may be entitled to knock $25,000 off your new home’s assessed property value. Property taxes are based on your home’s value, so this lower assessment could reduce your annual tax bill — and by extension, your monthly mortgage payments. This reduction won’t work if you’re buying a vacation home or investment property.
Seller’s disclosure obligationsUnder Florida law, the seller is obliged to disclose to you anything that might materially affect the value of the home. You should receive a standard form that contains all the information you need. While the seller is legally required to tell you about defects, they only have to disclose defects they know about. You’re relying on their honesty. Thus, a third-party home inspection is still a good idea.
HOA transparencyCondos and homes in areas governed by homeowners’ associations are particularly common in Florida. Take time to review your new association’s rule book because it may limit your freedom as a homeowner. Also, study the association’s accounting books to make sure it’s on a firm financial footing. You’re legally entitled to see both the association’s financial records and its guidelines before you buy a home and start paying HOA dues.
Florida mortgage ratesInterest rates in Florida are near historic lows. Current rates make home buying and property investing more affordable. But keep in mind, statewide or national average rates may not reflect the rates you’d qualify for. That’s because home purchase and refinance rates are personalized to each borrower. Your credit report, loan type, and loan amount will help determine the cost of your home loan. To find your best rate, shop around with at least three different mortgage lenders.
Refinancing in FloridaRefinancing in Florida is pretty similar to doing so anywhere else. But there are a few unusual laws:
- You can’t refinance (including taking a second mortgage*) more than once every 12 months
- You must keep 20% of your home’s value in your home. That means you can’t borrow more than 80% of your home’s current market value, in total, between a first and/or second mortgage
- You’re only allowed one second mortgage at a time. If you have one already and need more money, you’ll have to pay off the existing loan from the proceeds of the new one
- You have to close the transaction at the offices of the lender or title company. You can’t have someone visit your home to close
Mortgage calculator: FloridaCalculate your mortgage payment for a home in Florida. Start by finding your current mortgage rate using the filters above. Then enter your rate, home price, down payment, and loan term into the mortgage calculator below to estimate your monthly payment.
Private mortgage insurance in FloridaFlorida home buyers who put less than 20% down on a conforming loan typically have to pay private mortgage insurance (PMI) premiums. The rules for PMI are no different in Florida than the rest of the U.S. Although it’s the homeowner who pays for it, mortgage insurance protects the lender in case a borrower can’t make loan payments. Note, private mortgage insurance on a conventional loan can be canceled once the homeowner’s loan-to-value ratio reaches 80% or lower. This happens when you’ve built at least 20% equity through rising home values and paying off your mortgage. A similar type of coverage, called mortgage insurance premium or MIP, is required for all FHA loans. The FHA loan program requires this insurance throughout the life of the loan unless you put at least 10% down. In that case, these mortgage insurance payments go away after 11 years. You could also refinance into a conventional mortgage loan later on to eliminate the FHA loan’s mortgage insurance premiums.
Mortgage loan options for Florida home buyersHome buyers in Florida can choose between two types of loans: conventional or government-backed. Most conventional loans fall into the category of "conforming loans," as they conform to Fannie Mae and Freddie Mac guidelines. These mortgages offer great deals for home buyers with good credit and moderate to large down payments. The other category of mortgage loans are insured by the federal government. These include:
- FHA Loans: Backing from the Federal Housing Administration helps lenders offer affordable interest rates to borrowers with lower credit scores, starting at 580 in most cases
- VA Loans: The Department of Veterans Affairs runs a mortgage loan program for veterans, active-duty service members, and surviving spouses who qualify. VA loans offer some of the best rates in the market. Plus, these loans require no ongoing mortgage insurance or even a down payment
- USDA Loans: The U.S. Department of Agriculture can back mortgages for lower-income Floridians who live in rural areas. You could borrow with no down payment and lower mortgage insurance premiums compared to an FHA loan. About 80% of Florida meets the USDA’s definition of “rural”
Help available from Florida Housing Finance Corp.First-time home buyers in Florida who need help making a down payment or paying closing costs should check out the Florida Housing Finance Corp. Florida Housing’s programs can help with conventional 30-year fixed-rate mortgages or with government-backed loan programs. Some borrowers can get a loan to cover closing costs with a 0% interest rate, which doesn’t have to be repaid until the home is sold. Using down payment or closing cost assistance to buy a home sooner could pay off. You would have a stake in the growing housing market and avoid paying higher home prices later. Zillow reports Florida's average home value in February 2022 to be $356,349 — up 29.4% from the previous year
How to get the best rates on a Florida home loanMortgage shopping in any state is a personal process. Your credit report, debt-to-income ratio, and other personal information help lenders set your mortgage or refinance rates. This means you can’t always expect to get the best rates you see quoted online. But it also means you have some control over your interest rate. To increase your chances of getting the best rates in the market today, you can:
- Work on your credit report and score. Borrowers with FICO scores above 720 and a clean credit report can get great rates from many lenders
- Get a 15-year loan term if possible. National averages on 15-year fixed-rate loans tend to fall below averages for 30-year fixed-rate mortgages. A 15-year fixed-rate loan requires much higher monthly payments but costs less over the long term
- Find the right loan type. Thanks to government backing on FHA, USDA, and VA loans, borrowers with lower credit scores and down payments can still get competitive rates on these loans