subject: Knowing Your Options For Home Financing [print this page] Finding a new home can be a great experienceFinding a new home can be a great experience. This is where you and your family are going to live a while and build your dreams. Unfortunately, as the recent past shows, some of these dreams have turned into nightmares. A lot of the problems have been home borrowers being straddled with burdensome home loans. 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. An FHA mortage is going to require 10% down payment for a home purchase when your credit score is 580 or below. This amount reflects the recent increase in the upfront mortgage insurance premium to 2.25%. A minimum of 3.5% down payment is a requirement for applicants with credit scores above 580. If you choose a conventional mortgage, then down payments up to 20% of the house cost can be required. There are conventional loan lenders that do offer down payments less than 20%, some as low as 5%. You may need to purchase private mortgage insurance if you are able to finance with a lower down payment loan. Private mortgage insurance will protect the lender if you default on the home loan.
Types of Mortgage-Repayment Loans
Fixed Rate Mortgage Loans:
Advantages- Over the term of the loan you know the fixed loan payment since the interest rate is set. 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- 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- 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 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. The loan agreement generally sets the minimum and maximum interest rates.
Mortgage Programs
Federal Housing Administration (FHA) Mortgage Program:
FHA loans assist first time home buyers to afford their home. This is accomplished by making the down payment requirement much lower than conventional loan terms. 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:
When a mortgage is backed by Veteran Affairs there is little or no down payment requirement. 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
A mortgage that is not insured by FHA or VA is 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.
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.
