The US Mortgage market is red-hot right now. After almost a year of pandemic living, many people are ready to have extra space at home. With all those potential buyers searching the market, housing inventory has gone ultra-low, and the competition has reached its peak. According to the National Association of Realtors, almost four offers were on the table for every house that went on sale in 2021.
With the current scenario, it’s no wonder you’re considering applying for a mortgage to buy your first home in Florida. However, if you are hoping to get approved for a mortgage, your first move should be to get a pre-approval letter from a reliable Florida mortgage company. No seller will take your offer seriously without proof that you can get the loan.
Also, it is essential to understand the mechanics of the mortgage process and what you can afford before you sit down with the loan officer. Typically your loan officer will be available to assist you through the entire mortgage process, but it is still recommended that you prepare a list of questions you need answers for.
Here are the key questions you should ask yourself before applying for a mortgage
How Much Can I afford?
Naturally, your first question should be related to your budget. You don’t want to find your dream home only to realize that you can’t afford it. So what do you do if you are ready to buy a house?
Well, many helpful calculators are available online that can give you a better idea of what your monthly mortgage payments might look like. In addition, mortgage lenders usually have their affordability calculators to help guide you.
But generally, having a good credit score will let the lender know you’re a reliable borrower. Most mortgage lenders in Florida require a credit score of at least 620, but some government-backed loans allow for a lower score. Just remember that a higher score can result in you being approved for a loan with a lower interest rate and better terms.
While this is great news, be careful not to overextend yourself when budgeting for a mortgage payment. You’ll also want to have enough money each month to cover maintenance, repairs, and other unplanned expenses.
How Much Should I Put Down?
So you are qualified for a larger loan, congratulations but now what? Well, you’ll need to ensure that you have enough cash to cover your down payment and closing costs.
Although coming up with a larger down payment can be difficult, the more money you put down, the more home equity you’ll have. This can protect you from fluctuations in the housing market, and you won’t have to worry about owing more than your home is worth.
A larger down payment can also help you get a lower interest rate on your loan, which can save you money over the life of the loan. In general, most lenders require a minimum down payment of 5%. But if you are getting a government-backed loan, like an FHA loan, you may be able to put as little as 3.5% down.
Which Type of Mortgage is Best for Me?
Now that you know how much you can afford and need for a down payment, it’s time to start thinking about what types of mortgage loans in Florida are best for your situation.
We will keep this part simple and focus on a few particular loan types available for borrowers with unique circumstances.
VA Loans: If you are a veteran or active-duty military member, you may be eligible for a VA loan. These loans are backed by the Department of Veterans Affairs and offer great benefits like no down payment and no private mortgage insurance (PMI).
FHA Loans: If you are a first-time home buyer, you may also be eligible for a government-backed loan like an FHA loan. These loans often have more relaxed credit requirements and can be a great option if you don’t have a lot of money for a down payment.
Jumbo Loans: If you want to purchase a home above the conforming loan limit, you’ll need to apply for a jumbo loan. These loans usually have higher interest rates and stricter credit requirements.
If none of these sounds like the right fit, don’t worry. There are many other types of loans available, and your loan officer can help you figure out how to choose the best mortgage loan that suits your situation.
How Long Should my Loan Term Be?
There are 30, 15, and 10-year loans available, with 30 being the most common. Some lenders also offer varying loan terms inside the 10 to 30-year range.
What’s more important when choosing a loan term is finding a monthly payment that you’re comfortable with. So if you can make higher monthly payments, a shorter loan term can reduce the interest you pay throughout the loan and can often get you a lower interest rate.
But a longer loan term might be the way to go if you’re tight on cash and need to keep your monthly payments low. Just remember that if you choose a longer loan term, you’ll pay more interest over the life of the loan.
How Much is the Current Interest Rate?
Interest rate is simply the cost of borrowing money; paying attention to it is essential because it can significantly impact your monthly payment. In addition, mortgage rates can change a lot since they’re affected by things like the Federal Reserve’s interest rate, inflation, and the well-being of the housing market.
A simple way to avoid getting surprised by an interest rate change is to lock in your rate over the long term. You also have the option to let it move with the market with one of the many adjustable-rate mortgages that are available.
A fixed rate for the life of the loan will usually have a higher interest rate than one that is adjustable. But with a fixed rate you’ll know exactly what your payment will be for the next 30 years, which can offer some peace of mind.
To find out which type of mortgage rate is best for you, ask yourself about your plans for the future.
Are you planning on selling your home in the next few years? If so, an adjustable-rate mortgage could save you money. On the other hand, if you plan on staying in your home for the long haul, a fixed-rate mortgage will give you the stability of knowing your monthly payments.
Your loan officer from your chosen Florida mortgage company can help you understand your interest rate options and help you choose the best one for your situation.
Which Lender Should I Choose?
We have saved the critical one for the last.
Choosing the right lender is just as important as choosing the right loan because it will significantly impact your overall mortgage experience. Mortgage companies in Florida will vary in their offerings, rates, customer service, and more.
So it is best to explore to find a lender you can trust and who will provide you with the best deal. Read customer reviews, compare rates and products, and even ask for referrals from friends or family who have recently purchased a home. At the end of the day, you want to choose a lender who will make the mortgage process as easy and stress-free as possible.
At 1st Florida Mortgage, we pride ourselves on being that lender. We offer a wide variety of loan products, and our experienced loan officers will work with you to find the one that best fits your needs. We also offer some of the most competitive mortgage rates in Florida, and our goal is to make the mortgage process as simple as possible.
If you’re ready to start the mortgage process, we’re prepared to help. Contact us today to get started.