Credit Repair, Loans, Mortgages

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. FHA and Conventional mortgae programs are requiring increased down payments after the recent mortgage defaults. The only exisitng program not requiring down payment is the VA Program 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%. FHA program only requires a 3.5% down payment if your credit score is above 580. A conventional mortgage will require a significantly higher down payment requirement than the other programs, as high as 20% in some circumstances. There are conventional loan lenders that do offer down payments less than 20%, some as low as 5%. In the event you obtain a lower down payment conventional loan you could be required to buy private mortgage insurance. Of course the insurance is a safety feature for the lender should you default on the loan.

Mortgage Loan Repayment Requirements- Which Suits You?

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- Because the interest rate is locked it is usually higher than an adjustable rate motgage. If the homeowner is planning to leave in less than 5 years this could be costly.

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- 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. 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

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.

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.

Jill Schmitt a licensed Florida Property Broker-Associate for Homes in Gainesville Florida. Jill specializes in Gainesville Realty and has written many articles to assist educate the public in Buying and Selling Property.