Finding your dream luxury home is only part of the challenge when you're in the market for a new house. The other part is finding the right loan to finance that dream. Which type of Valrico home financing is best for you? It's not as easy as deciding if you prefer a 15-year or 30-year term.
You'll have to factor in how much money you'll have to borrow, impacting how much down payment you'll have to put down. The state of your credit plays a role as well. Innovative financing always matches your financial goals. However, with all the options available, finding the one that makes the most sense may feel daunting. This is why it's always a good idea to have a professional real estate agent working closely with you to determine which option is best for you.
Six types of Valrico home financing options
1. Conventional mortgage
You can purchase a house with as little as 3% down with a conventional mortgage if you're a first-time homebuyer. If you already own a home, you'll need 5% down. Your credit score will need to be at least 620 to qualify. If you put a minimum of 20% down, you won't have to purchase private mortgage insurance (PMI).
If you put anything less than 20% down, you'll be required to buy PMI. Conventional loans typically come with lower mortgage insurance rates than other loan types, like a Federal Housing Administration (FHA) loan, for example. Conventional loans are a better option for most borrowers looking to put down a larger down payment and take advantage of lower interest rates.
2. Fixed-rate loan
You generally pay monthly for a typical loan term of 15 or 30 years. It comes with a single interest rate that stays the same (fixed) for the entire life of the loan.
Fixed-rate loans are suitable for homeowners who prefer predictability and don't plan on going anywhere soon. You'll pay a certain amount for a certain number of years. You'll also have to pay a down payment. Your home loan terms won't be changed due to interest rates rising and falling, so you can rest assured your monthly payment will not change. If you plan on staying in your home for a good portion of the loan term, then a fixed-rate mortgage may be a good option.
3. Adjustable-rate mortgage (ARM)
In recent years, ARM mortgages were blamed for the flood of foreclosures, but they're rising in popularity again, especially among luxury property buyers.
ARM loans are particularly tempting for homebuyers requiring jumbo loans. Nearly half of all jumbo loans are ARMs. Lenders state that high-net-worth homebuyers face relatively little risk since they can pay off a loan by tapping into liquid assets should there be a sudden spike in interest rates. Because of this, high-end buyers take advantage of ARMs to finance their home purchases and unlock some savings.
4. Jumbo bank statement loan
These loans offer features such as no tax returns required, high loan amounts, no PMI required with down payments less than 20%, up to 50% DTI ratio, and more.
With the jumbo bank statement loan type, lenders are looking for credit scores of 660 or above. Your credit score not only determines what your down payment will be, but it also influences the interest rate you'll pay.
5. FHA loan
To be eligible for the lowest down payment, which is 3.5% of the home's purchase price, you need a minimum credit score of 580. If you have a lower credit score in the 500 to 579 range, you must put at least 10% down. All borrowers have a maximum of 43% DTI ratio, and you can only use this mortgage option to fund a primary residence. Any borrower who puts less than 20% down will have a PMI requirement.
6. Non-qualified mortgage (non-QM)
How can a skilled Valrico, FL, real estate professional help?
An essential first step in buying a home is getting preapproved for a loan. Therefore, it can benefit you to work with a skilled agent.
Let Brenda Wade assist you with your Valrico home financing needs
Smart finance options are available to you. Let Brenda help you find the right home so you can move into your new home as quickly as possible. Contact Brenda Wade today to get the process started.