Purchasing your first home is a big step that comes with a lot of responsibility. To set yourself up for success in your homeowner’s journey, the first thing you need to do is decide which mortgage loan works best for you.
There’s a wide variety of mortgage loans available, which can make it challenging to decide on which loan will work best for your needs and budget. So we’ve put together a comprehensive guide to help you find the perfect mortgage loan!
Choosing Your Loan
To make things easy, we’ve put together a few tips from our experts to help you decide on a mortgage loan that works best for you!
Step 1: Determine Your Budget
Before searching for a specific type of loan, it’s essential to determine your budget and the loan requirements for the home you’re looking to purchase. How much money do you need to borrow to purchase? Once that is determined, you need to view your credit score and see if you can get approved for said amount. A loan calculator is a great way to determine your eligibility!
Florida mortgage lenders say that a good credit score will appeal to lenders and allow you to borrow the entire loan amount. Always remember that “their job is to provide a loan, and your job is to pay it back on time.” Ensure that you factor in your living expenses and not just the monthly mortgage payment into your budget.
Step 2: Prepare For Additional Fees
Purchasing a home comes with various internal costs like your down payment, closing costs, and much more. Before signing any contracts, make sure you are aware of these additional costs and plan accordingly.
Down payments are a common requirement among most mortgage lenders. Lenders will ask you to put down a certain sum of money upfront as a security deposit. Down payments may sound like a big ask, but they will end up benefiting you in the long run. Presenting a larger down payment can also help to give you better mortgage rates. You need to know factors that affect mortgage rates.
Step 3: Decide on The Length of Your Loan
The phrase “30-year mortgage” can make anyone cringe. Unfortunately, mortgage loans are a long-term commitment. You’ll be happy to know that home loans also last for shorter durations, but they come with higher monthly payments.
Some lenders also offer customized loans. It allows you to pick the desired length of your loan. The duration of the loan has a direct impact on the EMIs. If you choose a mortgage that has a shorter term, you’ll end up paying higher monthly payments. But, there are some benefits to this-
- Reduction in your total loan interest
- Better mortgage rates
Although these benefits may look appealing, don’t rush into anything. Instead, assess your finances, budget, and make your final decision after considering every aspect of the home buying process.
Step 4: Choosing the Right Type of Mortgage Loan
Choosing the right type of mortgage loan is crucial. As we mentioned above, there are various types of Florida mortgage loans. To keep things simple, we’ve listed the most common types of loans available on the market-
- VA loans: An excellent option for veterans
- USDA loans: If you are planning to purchase a home in a suburban or rural area
- FHS: A great option if you have a lower credit score
- Jumbo loans are meant for those who plan to purchase a house that exceeds the financial limits of standard loan guidelines.
We recommend doing extensive research and chatting with multiple lenders before making any big decisions.
Step 5: Interest Rates
The extra amount you will have to pay when borrowing money to purchase a home is known as interest. Your interest rate is a crucial factor as it will significantly affect your monthly payments.
Interest rates are constantly fluctuating when the bond market is open. Without any guidance, you may end up acquiring a high-interest loan which can put a dent in your pocket. We’ve provided you with a few extra tips on how to get the best mortgage rates possible-
- Fixed-rate mortgage rates allow you to lock in the interest rates of your loan over a long period.
- An adjustable mortgage rate allows you to let the rate fluctuate with the bond market and adjust the rate once a year.
The cost of a fixed-rate mortgage may start higher than an adjustable-rate mortgage (ARM). However, with ARM, the interest reset every three, five, seven, and ten years. Your interest rate is unstable and can fluctuate in any direction. If it goes down, you will receive a lower interest rate and VICE VERSA.
The type of interest rate you apply for depends on what you are planning to do with your home. Do you plan to live there for the next five years, or do you plan to move to another home? We recommend you consider these two points-
- Determine how long you will be residing at the property
- Figure out the time in which you can retain your mortgage
If you are sure about moving on to the next property and you can pay off your loan in advance, an ARM may be a good option for you. On the other hand, a fixed mortgage rate would be more beneficial if you want to stay in the house for the next 7-8 years.
Finding a great mortgage lender can help to make your home buying process stress-free and straightforward. At 1st Florida Mortgage, we have the knowledge and expertise you need to get the absolute best mortgage rates for your needs and budget. We provide low-interest rates, less additional fees, and a quick closing process!
Visit 1st Florida Mortgage to learn more about us today!