Homes in Gainesville Florida

Homes in Gainesville Florida - Financing a Home Purchase

Financing a Home Purchase

Once you are done looking at the homes in Gainesville Florida and decided on the one you want to buy, it is time to do the serious homework- finding the best type of financing for your new home. So how much down payment will you need and what type of mortgage is available to finance my new home purchase?

Down Payment Requirements

In order to finance the purchase of a home in Gainesville, Florida you will need cash to qualify for the down payment program 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 conventional loan lenders that do offer down payments less than 20%, some as low as 5%. If you can get this type of conventional loan, you may need to purchase private mortgage insurance. This insurance requirement is protection for the lender if you fail to pay the mortgage.

Types of Mortgage-Repayment Loans

Fixed Rate Mortgage Loans:

Advantages- Interest rate is fixed and does not fluctuate; monthly principal and interest payments stay the same, suitable for the homeowner planning to occupy the home for a long term. The terms of these loans range from 15, 20 or 30 years.

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 can take advantage of a lower fixed rate, 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- May not be good for a homeowner on a low or fixed income, may not be beneficial for a homeowner planning home occupancy for longer than 5 years, monthly payments can increase significantly after the initial teaser rates have expired. The loan agreement generally sets the minimum and maximum interest rates.

Mortgage Programs

Federal Housing Administration (FHA) Mortgage Program:

A mortgage secured by the Federal Housing Administration requires a 3% down payment of the purchase price of the residence. 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:

A mortgage that is provided by the Department of Veteran Affairs requires little or no down payment. However, VA mortgages have additional requirements.

• VA loans are only available to military personnel or veterans or surviving spouses who have died from service related injuries.
• 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 conventional mortgage is any other type of mortgage that is not an FHA insured or VA guaranteed mortgage. As discussed above it requires a larger down payment and also requires Private mortgage insurance (PMI) when the LTV ratio 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 new homes in Gainesville, Florida.