Mortgage Information

Buying a home is one of the largest financial decisions you can make, and most buyers finance their new home with a mortgage. A mortgage allows you to borrow most of the purchase price of the home and pay it back monthly over an extended period of time (15-30 years).  Choosing an experienced local lender can keep the mortgage process from becoming a stressful and confusing process, allowing you and your family to focus on starting your new lifestyle.

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Choose the Right Lender

The first step to take in getting a mortgage is to choose an experienced local lender and get pre-approved. It’s always best to go with a local lender that knows the local lending rules and customs, especially here in Florida. An online lender halfway across the country may not be aware of the restrictions and requirements for buying a condo in South Florida.

A good lender will also insist that you are pre-approved, not just pre-qualified. A pre-qualification typically just means a lender has looked at your in-file credit report and asked for your income, this is usually done verbally or through pay stubs and is not verified.  A pre-approval means that you have completed a full loan application and the lender has verified your credit, income, and debts, and is already aware of what the final approval conditions will be. This is especially important if you are self-employed or itemize your income tax and take a large number of deductions – that will affect your qualifying income.

Being pre-approved is the most accurate way of knowing how much you can qualify for. It also brings peace of mind to the seller when you make an offer, it lends credibility to your offer and tells the seller you are already backed by a bank, so they feel more confident in accepting an offer from a buyer who is pre-approved than one who is not.

There are several different types of mortgage loans you can use to purchase your new home, consulting an experienced mortgage loan officer is the best way to find out what type of loan would have the best terms for your purchase.

Types of Mortgage Loans

There are several different types of mortgage loans you can use to purchase your new home, consulting an experienced mortgage loan officer is the best way to find out what type of loan would have the best terms for your purchase.

  • Conventional Loan– The most common and traditional loans where a mortgage comes with a fixed number of years to pay it back. If you have good credit and qualifiying income you may easily qualify for a conventional loan. Three different categories of conventional loans are:
    • Fixed Rate – This mortgage has a fixed interest rate throughout the term of the loan.
    • Variable – Such a mortgage is one where an interest rate changes over time. It could be a fixed rate mortgage for the first five years and then becomes an adjustable rate when the fixed term expires.
    • Adjustable – Adjustable mortgages are connected to an index and the rate will increase or decrease depending upon the market.
  • Bi-Weekly Mortgages – These are mortgages where payments are made every two weeks as opposed to monthly with the intent of paying the mortgage off quicker.
  • Non-Conforming Home Mortgage Loans – These are loans provided to those who have not met the standard criteria to be approved for a mortgage.
  • Refinancing Loan – This is a new loan taken out to pay off an existing mortgage. The new loan will likely be one with better terms, an extended duration (life), and a lower interest rate. Many people refinance to lower their current rate.
  • Home Equity Loans – These are secured loans that are borrowed against the value of your home for home improvements and other expenses.

Government Home Mortgage Loans
There are special loan categories which are backed by the government. The most common categories of these loans are:

  • FHA Loans – These are low down payment loans insured by the government.
  • USDA/Rural Housing Loans – USDA Loans require no money down and are intended for purchasing a home in a rural area.
  • VA Loans – No down payment loans for qualified veterans and their spouses.

Which Loan Is Right For You?

Prior to selecting any loan, you need to ask yourself some questions about which loan is best for you. It is very important to have an experienced Loan Officer to help guide you through this process. They will be able to help you look at your budget, determine a reasonable amount you can afford, answer any questions about each type of loan and guide you to the best mortgage that will fit your needs.

Some common questions to ask include:

  • How much can you afford? It is never a wise plan to take a mortgage out on a home you cannot afford. As such, you will need to examine your debt to income ratio and figure out what you can afford within the budget you have available.
  • How much of a down payment will you make on the home? By knowing how much of a down payment you will make, you will be able to adequately save for it.
  • How long do you plan on owning the home?
  • Do you intend to make extra principal payments so you can pay off the loan early? Surprisingly, if you made one additional payment in a single year on a $250k loan with a 6.5% APR, you will save over $50k in interest in just six years. To do this the easy way, just divide your monthly minimum mortgage amount buy 12 and then add that amount to your monthly payments.

Make the Process Quicker

No matter what loan you decide on, you want to be sure that you facilitate the loan approval in the quickest manner. Ways to do this can include improving your FICO score to gain access to better interest rates, putting money aside for a down payment, and getting all required loan documents in order prior to applying.