Home purchases have made a comeback this year as the economy continues to recover and consumers return to the market. While many of these purchases are cash deals, most first time home buyers do not have the means for a cash transaction.
However, there are several Florida mortgage loans available for first time home buyers who are interested in attaining homeownership at a time when both home prices and mortgage rates are affordable. Each type of loan comes with its own guidelines and restrictions, so if you don’t qualify for one type, you may qualify for another.
Conventional loans are the most popular and widely used type of mortgage loan amongst all types of borrowers. Basically, the terms and conditions of a conventional loan meet the guidelines of Fannie Mae and Freddie Mac.
In addition to this basic mortgage, special first time home buyers programs are available for conventional loans, such as the Good Neighbor Next Door Program for law enforcement officers, teachers and firefighters/emergency medical technicians.
For the first time home buyer, conventional loans are available in a variety of terms (30, 20, 15 years) for a fixed-rate loan. There is also the option for choosing an adjustable rate mortgage (ARM). While these loans do require a down payment of 20%, most lenders will accept a minimum down payment of 5%. However, the borrower will be required to pay private mortgage insurance until the equity in the home has reached 22% or more, depending on the lender.
Qualifying for a conventional loan requires that the first time home buyer have a history of good credit and a stable source of employment and income. Assets must be able to cover the down payment, closing costs and the months of reserves that may be required by the lender.
The FHA loan program has always been popular with first time home buyers because it requires a lower down payment (as low as 3.5%) and accepts borrowers with lower credit scores. There are also several different types of FHA programs available to borrowers, such as the rehab and energy efficient mortgage. FHA loans are available with an option for 30, 20, 15 and 10 year terms with fixed rates that are very competitive and can often be the same or even less than those offered with conventional loans.
While there are many benefits that are part of an FHA mortgage, these loans do require both an upfront mortgage insurance premium and an annual mortgage insurance premium. Recent changes to the FHA loan program require that the annual mortgage insurance policy be paid by the borrower for the entire term of loan. This means that when equity in the home reaches 22% or more, the homeowner will need to refinance into a conventional or other type of mortgage in order to eliminate the monthly mortgage insurance.
The Department of Veterans Affairs does not make loans, but actually guarantees mortgages on behalf of eligible military members. VA loans are probably the most inexpensive mortgage for the first time home buyer who is eligible. Eligibility requires that the borrower be a veteran, military personnel or, in some cases, spouse.
First time home buyers will find that the VA loan does not require any type of down payment. It is truly 100% financing for a home purchase where the borrower does not need to pay private mortgage insurance. Although there is a VA funding fee, this fee can be added to the mortgage amount.
VA loans are also available with multiple terms for a fixed rate mortgage. The borrower also has the option to choose the VA adjustable rate loan. Interest rates for VA loans continue to be very competitive in today’s market.
Although these are the most popular Florida mortgage loans available for first time home buyers, each one may have additional programs available to help with a home purchase. It is important to discuss all of the options available since the type of mortgage that you get should always be the best and most affordable one that is available for you.
Never let someone talk you into a mortgage you’re not comfortable with.