Types of Mortgage Loans for Jersey Shore Home Buyers

Buying a Jersey Shore home consists of more than simply saving up a down payment. Before you even start to look at homes, you should concentrate on getting your finances together. How are you going to pay for it? Unless you can afford to pay cash for a Jersey Shore property, you’re going to need to get a mortgage loan. But which one depends on your specific financial situation and needs. To help you sort out one loan from another, I’ve provided a description of the most common types of mortgage loans available for Jersey Shore home buyers.

FHA, VA, conventional. adjustable-rate or fixed-rate. When it comes to Jersey Shore mortgage loans, which one of these makes the most sense for you?

Types of Mortgage Loans

FHA Mortgage Loans

Search Jersey Shore homes for saleIs this the very first home you’ve ever bought? Is your FICO score less than stellar? Don’t have a large down payment? You might be eligible for an FHA mortgage loan. Keep in mind that a “first-time home buyer” is considered any person who hasn’t owned a home in the last three years. So, even if you did own a property in the past, you still might qualify as a first-time home buyer. This government-backed loan allows buyers to purchase with as little as 3.5% down and a 580 minimum FICO score. If your score happens to fall between 500 and 579, you’ll need to come up with at least 10% down. However, when your down payment is less than 20%, you’ll have to pay PMI (private mortgage insurance).

VA Mortgage Loans

We owe a lot to our brave men and women who fight for our country. Making it a little easier for them to qualify for their own home seems like a very small payment for what they’ve done. Active and retired military personnel can choose to apply for a VA mortgage loan in order to pay for their Jersey Shore home. VA applicants pay no money down and never pay private mortgage insurance. Sometimes, the seller pays the capped closing costs. VA applicants simply pay a funding fee to help offset the cost of the program. The funding fee ranges anywhere from 1.25% to 3.3% of the loan amount, depending on your type of service, the amount of down payment (if any), and whether this is the first time you’ve applied for a VA loan. This fee and the closing costs (if paid by the applicant) can usually be rolled into the monthly payment if necessary. However, there are several restrictions about the type of home you can purchase. So, sit down with your mortgage broker before you head out searching for a new home.

Conventional Mortgage Loans

While FHA and VA loans are backed by the government, conventional mortgage loans are not. Conventional loans tend to offer lower interest rates and better terms. Translation? You pay less for your loan. To qualify for a conventional loan, your FICO score cannot fall under 620. You must show a consistent, stable work history. Lenders like to see at least two years with your current employer. Also, lenders look for a debt-to-income ratio of no more than 45% of your gross monthly household income (less than 38% is preferable). That includes your new monthly mortgage payment (with taxes and insurance), which shouldn’t exceed 28% of the gross monthly household income. Fannie Mae and Freddie Mac loans require as little as 3% down for qualified applicants. But, remember. If you put less than 20% down, you still must pay PMI.

Fixed-Rate Mortgage vs Adjustable-Rate Mortgage

As far as rates are concerned, there are two options: fixed-rate and adjustable-rate. Fixed-rate mortgage loans come with 15, 20 or 30 year terms. As the name implies, your interest rate stays the same for the life of the loan. These rates tend to run a little higher than an adjustable-rate mortgage. But, your budgeting becomes a little easier when you know precisely what your payment will be for however long you own your Jersey Shore home. If you plan on being in your home for at least seven years, the fixed-rate mortgage might be the best way to go.

On the other hand, the adjustable-rate mortgage lets you get into a Jersey Shore property with less money. Rates typically fluctuate from year to year. So, while you might start of with a lower rate in the beginning, it can soar to a much higher rate in just a few years. If you only plan on staying in your home for a couple of years before you sell, you might want to consider an adjustable-rate loan. Talk to your mortgage broker about all your options before deciding on which mortgage loan to go with.

Sherri Lilienfeld, Apex Prime Realty, Your Source for Jersey Shore Real Estate

Leave a Comment

Your email address will not be published. Required fields are marked *