The home loan process can be daunting and unfamiliar, particularly for first-time home buyers. The process involves several steps like applying for the loan, discussing the terms with the bank, getting documents evaluated, processing the loan, and signing the agreements.
Understanding these steps in more detail will help make the loan process easier for you. The following is everything you need to know about your mortgage options when applying for a loan in Florida.
The Qualification Stage
For you to qualify for a home loan in Florida, lenders will need to consider several things. Many people mistakenly think that all lenders check is a person’s credit score but that couldn’t be further from the truth.
While a person’s credit score does play a crucial role in the loan qualification process, lenders will also need to look at other factors when determining just how much money to lend you.
One factor that Florida lenders will look for is a person’s stability. A lender will want to know whether you’re making enough money to afford the monthly repayments. Without a stable income, your lender won’t feel comfortable offering you a significant loan.
Besides your income stability, lenders will also look at your debt repayment history. That’s why it’s important to repay debts on time.
Lenders will also look at your credit rating. Of course, the higher your credit score, the more confidence a lender will have when loaning you more money.
The other factor that will determine how much lenders offer you is the home’s value. Depending on the loan type you’re offered, you’ll need to put down a predetermined minimum as a down payment.
The Budget
This is where you’ll need to determine how much money you can feasibly spend on the home. To do so, you’ll need to consider your income as well as any recurring debts you may currently have.
One of the easiest ways to help you calculate your budget is by using the 28% Rule. The rule dictates that your home loan shouldn’t be more than 28 percent of your monthly gross income.
Loan Options
When applying for a home loan in Florida, you’ll probably have many options available to you. There are various online handbooks, including one from the Department of Housing and Urban Development of Agriculture and Rural Development to help you understand the various loan options available to you.
Perhaps the most common loan options available to potential home buyers are conventional loans, USDA loans, VA loans, and FHA loans. Understanding what each of these requires will better prepare you for when to comes time to apply for them.
That being said, seeking professional advice is recommended to help you make sense of the whole process and ensure that you’re getting the best loan possible.
Down Payment
When qualifying for a home loan, you must know how much your downpayment will be. A home downpayment is the purchase price you’ll need to pay upfront and won’t come from the mortgage lender.
The amount to pay as a downpayment depends on the loan type you are receiving. Most conventional loans, for instance, require a downpayment of anywhere between 3 and 5 percent.
As for FHA loans, you may need to put down a minimum of 3.5 percent. USDA and VA loans require no downpayment, but often carry many restrictions that you must make yourself aware of.
If the downpayment on your home loan is quite a significant sum, you may be able to pay it using methods beyond out-of-pocket ones. One such option is paying for it using a financial gift. Just make sure you do it properly lest it gets rejected by your bank.
Besides using a financial gift, you may also be able to apply for a short-term loan to pay for the down payment.
Monthly Payment
Several factors come into play when it comes to the monthly payments on your home loan. Lenders will often factor in the following things:
- The price of the property. This is the starting point to figuring out how much mortgage payments will be.
- The downpayment amount. Putting down a sizeable downpayment can help lower the interest rate and reduce the size of your loan.
- The interest rate on the home loan. The interest rate, according to the Consumer Financial Protection Bureau, is based on factors such as the economy, credit score and property’s location.
- The terms of the loan. The payments can vary depending on how much time you have to pay off the loan.
- The property taxes. This depends on the home’s location.
Other factors may also come into play. For example, HOA fees, private mortgage insurance, and homeowner's insurance.
Choosing a Lender
When looking for a financier in Florida, it’s necessary to find one that you’re comfortable with. After all, a home loan is a huge financial undertaking.
The following are questions you might want to ask your Florida mortgage lender:
- How does a mortgage work?
- Do you offer fixed or adjustable rates on home loans?
- What do I need to do to qualify for a mortgage loan?
- How much do I need to have for a downpayment?
- How much will my monthly downpayment be?
- How long do you take to process a loan?
Be sure to get as much information from the lender as possible. Not all lenders are the same, and you must understand everything before signing on the dotted line.
Summary
There you have it, everything you need to know about your mortgage options when buying a home or an investment property. If you have more questions or need further help, please consider hiring professional help. The experts at Income Realty Corporation will be more than happy to answer any questions you may have!
