Choosing the right mortgage is an essential part of purchasing the right home. Whether you're searching for a home on the golf course, a luxurious condo, or a single-family home right on the water, you're likely going to finance your home purchase with a mortgage.
So, which mortgage is the right one for you? That depends on a number of different factors, mostly concerning your finances. So take some time to learn more about the many different types of mortgages out there before you decide on a Sarasota home. If you have any questions about mortgages, home-buying, or the Sarasota area, or you're looking for a local lender, please give us a call at 941-815-6772
Your Quick Mortgage Overview
Simply put, a mortgage is a loan. Just like with any other loan, you'll have to meet with a lender to discuss how much money they're willing to lend you, and the terms of your repayment. Mortgages are available for a number of different periods of time with varied interest rates and conditions. The mortgage that's best for you depends on your annual income, credit score, credit history, any outstanding debts you may have, and any assets you may have acquired over the years.
With so many different kinds of mortgage options out there, how do you know which are right for you? You can start by reviewing some of the most common mortgage types:
- Most common type of mortgage
- Constant interest rate over the lifetime of the loan
- Predictable, stable monthly payments
- Can be taken out in 10, 15, 20, or 30-year lengths
Adjustable-Rate Mortgage (ARM)
- Mortgage interest rate changes, starting small and fluctuating over time
- Are tied to one-year treasury bills or another specific index
- Starting interest rates may be lower than fixed-rate loans
- Rate can drop or increase based on the current market
- Pre-set spending limits based on location
- Often have looser credit & income requirements
- Only 5% down is required (sometimes 3%)
- Private mortgage insurance is required
- Available to most active, veteran, and retired military personnel
- Up to 100% financing
- May require a one-time funding fee
- May have looser income and credit requirements
- Often called 5/25s or 7/23s
- Fixed interest rates for the first 5 or 7 years, then change to convertible or nonconvertible loans
- Convertible loans become fixed-rate loans for the remaining 25 or 23 years
- Nonconvertible loans become adjustable-rate loans
- Riskier than fixed rates, but less risky than ARMs
- You pay half the amount of a monthly payment
- Paid 26 times a year, rather than 12 times
- Cuts down on the amount of interest over the life of the loan
- Paying so often can be a drawback
How Much Will the Bank Loan Me?
This depends on your finances. Before you begin home searching, we highly recommend you sit down with a local lender to get pre-approved for your mortgage. During the pre-approval process, the lender will review your credit score, credit history, annual income, any debts you've accrued, and any assets you may have. Then, they'll let you know how much the bank is willing to lend you.
Why Get Preapproved for a Loan?
We recommend meeting with at last two different lenders to ensure you're getting the best deal possible. The mortgage pre-approval process is valuable for these reasons:
- It lets you know exactly how much money the bank is willing to loan you
- You'll know what your potential maximum mortgage payment will be
- You'll know how much your down payment will be
- It makes you a more competitive buyer to sellers
Any Other Questions?
We have answers. If you're thinking of buying a home in Sarasota, FL, we should chat. We would love to connect you with home-buying resources or sit down to discuss your future plans.