Florida's Nature Coast Lifestyle

Mortgages: Which One is Right For Me?

Adjustable Rate Mortgage

There may come a time in your life where you will need to apply for a mortgage.  You may be buying a vacation home, relocating and haven’t sold your current home, or you’re a first-time home buyer.  It can be challenging to pick the type of mortgage that fits your financial situation.  One of the first things your local Realtor® should do upon beginning a real estate relationship with you is to determine if you need a mortgage and then recommend some mortgage brokers who will help guide you through the home mortgage process.

Did you know that there is an alphabet soup of mortgages available?  FHA, USDA, ARM, VA, FRM! Here are some explanations describing what types of loans are available to you.

Adjustable Rate Mortgage – ARM

  • Has an interest rate that will change or “adjust” over time
  • It is unpredictable
  • You won’t know how the rate will adjust. Will the rate go up or down?
  • You will be notified when the rate will change
    • ARMs have an interest rate cap that limits how much the rate can change from month to month over the life of the loan
    • May require a down payment of as much as 20%
    • Best used when the homeowner plans to stay in the home for just a few years

Fixed Rate Mortgage – FRM

  • Interest rate stays the same for the life of the loan
  • Payment amount stays the same of the life of the loan
  • The ratio of principal and interest will vary slightly from month to month; however, the payment amount remains the same. (You’ll be paying more interest than principal in the beginning of the loan)
  • Offers predictability since the rates never change.
  • It is the most common type of mortgage
  • It is the best option for people who plan to stay in the home (and keep the same mortgage) for many years.

Federal House Administration Loans -FHA

  • The Federal Housing Administration (FHA) mortgage insurance program is not just for first-time home buyers
  • The government insures the lender against losses that result from a borrower’s default
  • You will have to pay for mortgage insurance which will increase the amount of the monthly payment
  • May allow a smaller down payment (as little as 3.5%) of the purchase price
  • It’s generally easier to get approved for an FHA loan.
  • More flexible guidelines for credit scores
  • Allows for a higher Debt-to-Income ratio
  • More forgiving of a previous bankruptcy and foreclosure
  • It is not a free pass for reckless borrowers

Veterans Affairs Loans – VA

  • The Department of Veteran Affairs (VA) offers a loan program to military service members and their families.
  • These programs are guaranteed by the federal government, meaning the government insures the lender against any losses that result from a borrower’s default.
  • A major advantage for this program is that borrowers can receive 100% financing for the purchase of a home. No down payment!!!

United States Department of Agriculture Loans – USDA

  • The United States Department of Agriculture (USDA) offers a loan program for rural borrowers who meet certain income requirements.
  • This program is offered to residents of a rural area who have a steady, low to moderate income, but can not obtain adequate housing through conventional financing.
  • Citrus County is a designated USDA area.

As you can see, there are many different options when it comes to applying for a mortgage.  Speak to your local Realtor® and then your mortgage broker to see which option is the best choice for your Sugarmill Woods home purchase.

Ruth Edwards, Realtor, Coldwell Banker Next Generation Realty, Citrus County Realtor, Realtors® Association of Citrus County

About the Author:

Ruth Edwards, serves as the 2019 President of the Realtors® Association of Citrus County. Additionally, she is an active Realtor with Coldwell Banker Next Generation Realty. Contact Ruth for assistance in buying a Sugarmill Woods home, mortgage questions or any other Citrus County real estate needs. Email Ruth at: ruthedwardsrealtor@outlook.com or by phone at (352) 586-0115.

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