After deciding to purchase the home of your dreams then the real serious time arrives- finding a way to pay for it. All too many times not enough effort is made to find all the available options. 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.

Down Payment Requirements

The minimum amount of your down payment will depend on your selected mortgage program. For an FHA mortgage, if you have a credit score of 580 and below, the minimum down payment requirement is 10%. This amount reflects the recent increase in the upfront mortgage insurance premium to 2.25%. For all other FHA mortgage applicants, the minimum down payment minimum requirement is 3.5%. If you are considering using a conventional mortgage, 20% is the normal down payment requirement. There are cases of conventional lenders that do offer down payment requirements as low as 5%. If you can get this type of conventional loan, you may need to purchase private mortgage insurance. Private mortgage insurance will protect the lender if you default on the home loan.

Understanding the Types and Terms of Mortgage Loan Repayments

Fixed Rate Mortgage Loans:

Advantages- The stated interest is fixed and does not change over the term of the loan. A fixed rate loan usually is best fitted for the home buyer planning to stay in the residence for a period in excess of 5 years. The terms of these loans range from 15, 20 or 30 years. There are even 40 year loans.

Disadvantages- A fixed rate loan would not be cost effective for a buyer who is planning to leave in less than 5 years. The cost would likely be higher than an adjustable rate mortgage.

Adjustable Rate Mortgage Loans:

Advantages– May be best for a homeowner planning to either move or refinance in less than 5 years. If interest rates decline then they can take advantage of a lower fixed rate. This may be good for young homeowners who definitely know their financial circumstances will improve and can later absorb a possible higher fixed rate mortgage.

Disadvantages– Teaser rates often give a false picture of what can happen when the interest rates are allowed to be adjusted. Recently, home mortage payments have been delinquent and certain of these are attributed to adjustable rate mortgages. 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. Conventional mortgages require the buyer to invest a larger down payment into the home purchase. Private mMortgage Insurance (PMI) can be required when Loan to Value ratio is above 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.

Take your time and study the available mortgages. Seek out the right source for advice and information. You can not sit back and accept the information that is given to you. 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.

 

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