| Knowing Your Options For Home Financing |
| Articles - Mortgage |
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Once you are done home searching and decided to purchase a home it is time to get some solid advice on home financing. Let's start with how much down payment will you need and what type of mortgage is available to finance your new home purchase? Learn more about these financing options at Homes in Gainesville Florida. A service of Gainesville Realty.
Maybe you have been looking for a while and then finally you find that right home for you and your family. That is great but you want to make sure that yoour efforts do not stop there. The next step is to seek good advice on the type of loan you should get and how much you can truly afford. With the exception of the VA mortgages, all other mortgage programs require a down payment from the buyer towards the home purchase. Learn more about these financing options at Homes in Gainesville Florida. A service of Gainesville Realty. Down Payment Requirements The minimum amount of your down payment will depend on your selected mortgage program. If you are applying for an FHA mortgage you will need a credit score above 580 to avoid coming up with a 10% down payment requirement. This amount reflects the recent increase in the upfront mortgage insurance premium to 2.25%. If your credit score is above 580 then the minimum down payment requirement is 3.5%. You will need significantly higher down payment to qualify for a conventional mortgage, as much as 20% for certain situations. If you qualify, there are certain conventional loan programs that only require a down payment of 5%. You may need to purchase private mortgage insurance if you are able to finance with a lower down payment loan. This insurance requirement is protection for the lender if you fail to pay the mortgage. Understanding the Types and Terms of Mortgage Loan Repayments Fixed Rate Mortgage Loans: Advantages- Over the term of the loan you know the fixed loan payment since the interest rate is set. If you are planning to occupy the home for a longer period, in excess of 5 years, then the fixed rate loan is more to your advantage. The terms of these loans range from 15, 20 or 30 years. There are even 40 year loans. Disadvantages- Interest rate is usually higher that an adjustable rate mortgage and may not be beneficial for a homeowner planning to move in less than 5 years. Adjustable Rate Mortgage Loans: Advantages- When a homeowner is planning to stay a short period of time in the home or looking to refinance the loan in the near future then adjustable rate loans can work. Many times younger homeowners choose adjustable rate mortgages. They are hoping interest rates will decline or their financial situation improves then they can covert to a fixed rate loan. Disadvantages- Teaser interest rates were introduced to borrowers. Then when the rate was adjusted later it caused financial burden on the budget of the borrower. This caused a financial hardship that resulted in loan default and sometimes loss of the home. When the borrower is negotiating the initial loan, they should be totally aware of the adjustable interest rate that can be charged. Look for a cap on the interest rate that be levied during the term of the loan. Mortgage Programs Federal Housing Administration (FHA) Mortgage Program: With the down payment requirement being lowered, FHA assists homebuyers with the affordability to buy their new home. The amount of down payment cash for a conventional mortgage is usually out of reach for the person just starting on home ownership. Veteran's Affairs (VA) Mortgage Program: A mortgage that is backed by the Department of Veteran Affairs requires little or no down payment. However, VA mortgages have additional requirements. a.VA loans are only available to military personnel or veterans or surviving spouses who have died from service related injuries. b.Veterans are awarded a VA home loan benefits based on their military service and background. Veterans are still required to meet income and credit requirements to be eligible for their VA loan. Conventional Mortgages If you do not have a FHA or VA insured mortgage then you have a conventional mortgage. Due to the lack of being insured, conventional mortgages require large down payments or Private Mortgage Insurance (PMI). PMI is required when Loan to Value exceeds 80%. PMI insures the top part of the loan amount. PMI ceases when the loan is amortized down to 78% of the original appraised value. As you can see, the number of available mortgages is varied and requires proper information and advice to select the one best for you and your family. You should be careful to select a qualified mortgage broker or loan officer when financing your new home. For details and more information please visit Homes in Gainesville Florida. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Jill Schmitt a licensed Florida Property Broker-Associate for Homes in Gainesville Florida. Jill specializes in Gainesville Realty and has written several articles to help educate people in Buying and Selling Property. |