Financing a Home Purchase
Once you are done home searching and decided to purchase a home it is time to get some solid advice on home financing. 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. 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%. If you have a credit above the 580 requirement then you will only have to provide 3.5% down payment toward your home purchase. You will need significantly higher down payment to qualify for a conventional mortgage, as much as 20% for certain situations. There are some buyers who qualify to furnish down payments as low as 5% for conventional loans. In the event you obtain a lower down payment conventional loan you could be required to buy private mortgage insurance. Private mortgage insurance will protect the lender if you default on the home loan.
Terms and Types of Mortgage Loan Repayments
Fixed Rate Mortgage Loans:
Advantages- Interest rate is fixed and does not fluctuate; Fixed rate loans are best used by home buyers plaan to stay in the home for periods 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- 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- Monthly payments can be adjusted according to the term of the loan. Recently, because the maximum interest rate was not capped, interest adjustments caused the monthly payment to exceed the ability of the borrower to repay the loan. This resulted in the loss of the home to the borrower. 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:
The main purpose of the FHA loans is to make purchasing a home much more affordable, especially for the first time homebuyer. 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. 

 

Financing a Home Purchase - What you need to know!

 
Once you are done home searching and decided to purchase a home it is time to get some solid advice on home financing. 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. 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%. If you have a credit above the 580 requirement then you will only have to provide 3.5% down payment toward your home purchase. You will need significantly higher down payment to qualify for a conventional mortgage, as much as 20% for certain situations. There are some buyers who qualify to furnish down payments as low as 5% for conventional loans. In the event you obtain a lower down payment conventional loan you could be required to buy private mortgage insurance. Private mortgage insurance will protect the lender if you default on the home loan.


Terms and Types of Mortgage Loan Repayments


Fixed Rate Mortgage Loans:

 
Advantages- Interest rate is fixed and does not fluctuate; Fixed rate loans are best used by home buyers plaan to stay in the home for periods 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- 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- Monthly payments can be adjusted according to the term of the loan. Recently, because the maximum interest rate was not capped, interest adjustments caused the monthly payment to exceed the ability of the borrower to repay the loan. This resulted in the loss of the home to the borrower. 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:
The main purpose of the FHA loans is to make purchasing a home much more affordable, especially for the first time homebuyer. 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.