When it comes to building or buying a new home in Pinellas County, Florida, one of the most important decisions you must make is how you will finance the project. Prospective buyers have a variety of mortgage options to consider today.
Home loans available for Clearwater, Florida residents fall into two main categories: government loans and conventional home loans. Within these categories, the various types of home loans are accessible to prospective home buyers based on individual qualifications and criteria.
Listed below are the top seven types of home loans available. Remember that laws and criteria change rapidly, so please consult with a mortgage professional to make the best decision for you and your family.
A bit of a misnomer, government loans are not actually offered by the federal government directly. Instead, the government insures the loan in case the borrower defaults on the loan, which makes the mortgage less risky for financial institutions and allows them to lower their lending requirements for prospective home buyers.
Federal Housing Administration (FHA) loans are especially popular among first-time homebuyers or individuals with high debt-to-income ratios due to their availability to those with little savings and/or mediocre credit. Even with a 500 FICO credit score, you can qualify for an FHA loan with as low as 10% down. Those with a higher credit score – such as 580 and above – can qualify for a mortgage with a down payment as low as 3.5 %.
One catch with FHA loans is they are often accompanied with a mortgage insurance premium (MIP) that adds an additional fee – typically in the amount of .85% of the loan amount – which is charged annually. FHA borrowers are also required to pay an upfront mortgage insurance premium of 1.75% of the loan amount at closing.
As the name implies, VA home loans are only available for veterans, as they are backed by the U.S. Department of Veterans Affairs. These loans – although exclusive – offer numerous benefits for military service members and their families in Virginia, including no down payment requirement and no mortgage insurance, saving homeowners a couple of thousand dollars each year.
The U.S. Department of Agriculture also offers mortgages for residents in rural areas, commonly called Rural Housing Loans. Approximately 95% of the country falls within the program’s eligibility. The appealing aspects of these loans are similar to those of VA loans: no down payment and low mortgage insurance fees. USDA home loans do, however, require borrowers to have a 640 credit score or higher to qualify.
Conventional home loans, offered by private lenders and not insured by the federal government, are defined as conforming loans because they meet the guidelines of Fannie Mae and Freddie Mac, agencies that help standardize mortgage lending practices throughout the U.S. Although conventional home loans have more stringent requirements than government loans, they are the most popular type of mortgage among the general population.
One of the benefits of conventional loans is you have options for paying off your mortgage, as they come in 15-, 20-, 25-, and 30-year terms. They require a monthly mortgage insurance fee, but only if the homeowner makes a down payment that’s less than 20 percent.
An adjustable-rate mortgage (ARM) is a mortgage with an interest rate that changes over the life of the loan. ARMs generally come with introductory interest rates that are lower than the going rates for 30-year fixed-rate loans. That initial rate will hold for a period of 1,3,5,7 or 10 years, depending on the terms of the loan. After that, the lender can adjust the interest rate of the loan once a year. Generally, the rate increases. The amount by which the interest rate on an ARM can jump is capped in the loan term.
This low-down payment mortgage program is offered by Fannie Mae and designed to provide another option for individuals who don’t have enough for a sizeable down payment. As indicated by the ’97’ in the title, homebuyers only need to provide a 3% down payment.
This type of loan is available to both first-time homebuyers and repeat buyers. Applicants only have the option for 30-year fixed-rate mortgages.
As with many aspects of home buying and building, what is best for one person may not be best for another. The excellent news is prospective buyers in Florida have plenty of options when it comes to selecting the most suitable mortgage for their financial situation, specific qualifications, and how long they plan to live in the home.
If you’re ready to buy a new home, check out one of the DiGiovanni Homes available! Our new homes offer spacious, open floor plans in the form of single-family homes, condos, or townhomes in Tampa Bay’s best communities. Visit Digiovannihomes.com today to learn more!