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Mortgage Options

Author: Team Johnson/Monday, May 9, 2016/Categories: Home Buyers, St Augustine Homes for Sale

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Mortgage Options

What do you know about mortgages? Do you know your options? When it comes time to consider buying a home, it is important to have all your ducks in a row.  With the currently low inventory levels available on the market, you can lose out on a home while you are getting the financing details together.  Unless you are paying cash for a house, you will need to prepare for financing.  Your first decision will be which type of mortgage to apply for allowing you to get the best rate possible.  This blog was written to inform those looking towards purchasing a home about the most popular types of loan programs available to you.

Conventional Fixed Rate Mortgages
A conventional fixed rate mortgage has an interest rate that will stay the same over the entire term of the loan.  Usually that means 15, 20, or 30 years.  The drawback of a loan like this is that if interest rates fall, you will continue paying a higher rate.  A fixed rate mortgage will protect you if mortgage rates rise.  

Adjustable-Rate (Variable Rate) Mortgage
An adjustable rate mortgage usually offers a lower initial rate of interest than a fixed-rate loan.  The drawback of this type of loan is that after the initial period is over, the interest rate can fluctuate over the life of the loan.  When interest rates are on the rise you could end up paying more in monthly payments than expected.

FHA (Federal Housing Administration) Loan
An FHA backed loan can make owning a home possible for people that would not qualify for a home loan under other programs.  The biggest difference with an FHA loan is in the amount of the downpayment.  A conventional loan (fixed/variable) may require as much as 20% down plus closing costs, an FHA loan requires as little as 5% down plus closing costs.  The drawback to this type of loan is that the amount you can borrow may be limited and you will have to pay MIP (mortgage insurance protection) which is an insurance that protects the lender in the event of a buyer default.

VA (Veterans Administration) Loan
A VA loan is a guaranteed loan for eligible veterans, active duty personnel and surviving spouses.  Often you can get a VA loan with no down payment.  A VA loan also offers competitive interest rates.  Like a FHA loan, the size of the loan can be limited.

Interest Only
An interest only mortgage is when the borrower pays only the interest on the loan in monthly payments for a fixed amount of time.  After the initial period is over the loan is due.  This could cause a problem for some borrowers because at this point your options are to pay a lump sum or refinance.

Reverse Mortgage
A reverse mortgage allows seniors to convert the equity in their homes to cash that does not have to be paid back as long as the borrower is living in the house.  This could be a good option for seniors that do not have retirement savings or pensions; however, it is subject to a lot of false advertising and aggressive lending practices.  

The most important advice Team Johnson can give you, is to seek the advice of a professional before making a mortgage decision.  A mortgage professional should be contacted before you even begin looking for a home.  Having your finances in order gives you more bargaining power as you begin the search for your new home will prevent the possibility of losing out on that perfect home.  Team Johnson of Alta Realty Company can recommend several trusted professionals in the mortgage lending industry.  Give us a call at 904-217-3711 or email us at william.johnson@altarealtyco.com

 



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