For years you have dreamed of it, you have finally found the perfect home, and now it’s time to buy. But that also means it’s time for the unpleasant part of the process: to select and shop for the right mortgage, the one that best fits your needs and financial situation.Types of Home Loans for First Time Buyers and confusing financial jargon, it can be more than a little overwhelming. So let’s make it a little easier with this brief guide to different types of loans in Tampa Florida.
Of all the different types of loans, the standard, traditional, and still most popular is the 30-year fixed-rate mortgage. It owes its popularity to the fact that the interest rate is locked in for the loan’s lifetime (which is great when you get it at low interest rates) and that monthly payments are relatively low. But it has disadvantages.
For one thing, the interest is higher than for a shorter-term loan, so you wind up paying substantially more over the course of that 30 years. One way around this is to ensure that the mortgage contract enables prepayments. You can therefore pay forward, pay off the loan faster, and reduce the interest amount you pay.
Probably the second most popular of the different types of loans in Tampa Florida is the 15-year fixed-rate mortgage. It is basically set up like the 30-year loan, except that you pay it off over a 15-year period, which can save you a lot of interest. The interest rate (“fixed”) is locked in, so it will never change. The disadvantage here is that there will be higher monthly mortgage payments than a 30-year loan. So the trick is to determine if paying less on a monthly basis or paying less on a total interest meets your needs better.
A fixed – rate mortgage (ARM) has an interest that can change, unlike a fixed – rate mortgage. Typically, interest rates are lower over the first few years of the loan (often lower than current rates) and then rise as the loan matures. Although interest-rate increases are capped, you’ll still see significant jumps in the later years. This type of loan is usually best suited for people who plan to live at the home for only a few years before selling.
Little (or Nothing) Down
With both fixed-rate and adjustable-rate mortgages, you usually have to come up with a hefty down payment, sometimes as much as 20% of the sale price. But if you don’t have that kind of cash on hand, there are still options – but you’ll probably have to pay for private mortgage insurance.
Examples of these kinds of loans are VA loans and USDA Rural Development Loans, which allow no down payment. Fannie Mae and Freddie Mac loans come with only a 3 percent down payment requirement and a 3.5 percent down payment is available for FHA loans. However, you need to be aware that you are going to start buying your home with no or little equity, which is a risk if its value drops.
If you intend to buy an upper-end home with a big price tag, then, out of all the possible different types of loans, you may need to consider a jumbo loan. This type of loan is not like those mentioned above, a “conforming” loan. That means you will have to clear up higher hurdles to get the loan – for example, a credit score of 700 or higher, some savings, and more than one assessment. You may need a higher down payment as well.
So there are indeed quite a few options when it comes to the different types of loans in a Tampa Florida. It all depends on your specific financial situation and what it is going to be in the future. Usually getting the right loan means leaning on a qualified real estate professional’s expertise.