Tips for the First-Time Florida Mortgage Loan Borrower

Warm weather means two things in the Sunshine State: trips to the beach and trips to the Florida mortgage broker. Considering this is the most popular home-buying time of the season, let’s review a few steps every prospective applicant should take …

Check Your Credit First: The first thing you should do is to check your credit report and find out what your score is. Knowing what your credit looks like will give you an idea of what kind of terms you’llll get from lenders. The higher your credit score, the better loan terms and interest rates you’ll be able to get. If your credit is low, say in the 620 and below range, it may be wise to take steps to improve your credit score before getting a Florida mortgage for a new house.

It’s possible you may also have errors on your report. Sometimes closed accounts are still reported as being open; your personal information such as your mailing address may be incorrect; or you may find you’ve been the victim of identity theft. All of these things have a potential to impact your credit report, so get these issues resolved as soon as possible.

How Much Can You Afford? If you’re a first-time home buyer, you should always figure out what your price range is and how much you can borrow so that you don’t waste time looking at homes outside that range. Many online lenders offer calculators on their websites that can give you a close ballpark of what your price range is based on your income, assets and expenses.

Some of these online calculators can even help you decide which type of mortgage you should have to finance the new home.

Pre-Approvals, Pre-Qualifications, and Approvals Most lenders will give you a pre-approval or pre-qualification letter for a loan. This letter merely gives you an idea of how much you could borrow, but none of your information (income, assets, debts, and credit) has been verified; the amount you’re pre-approved for may not be what you can actually borrow, so the letter may not hold much weight.

To find out what you’re really qualified to borrow, it’s best to get an actual approval before you start shopping for a home. Again, so you don’t waste time looking at houses outside your price range. You’ll be in a much stronger position to negotiate with the home seller since your Florida mortgage loan financing is already approved. Too many sellers complain that they received offers that fell through because of financing problems. Getting an approval before you shop can avoid this and give you an edge over other bidders.

What Kind of Mortgage Should I Get? Deciding which mortgage to get depends on some key factors: how long you plan to be in the home, whether you’re inclined to take on some risk in terms of your interest rate, whether you need payment flexibility, as well as your current financial situation.

There are three basic categories of loans:

1. Fixed-Rate Mortgages: Fixed-rate mortgages are long-term mortgages that range between 10 to 30-year terms and have interest rates that are fixed for the entire loan term. These are good if you don’t like the idea of a variable interest rate and plan to be in your home for 10 years or more.

2. Adjustable Rate Mortgages (ARMs): ARMs are short-term mortgages that have interest rates that can vary. Many ARMs start out with a fixed rate for a few years (usually one to seven years), but are also 30-year term mortgages. After the fixed-rate period, the interest rate can adjust up or down, depending on the market. This can be a useful mortgage if you are only going to be in your home for less than seven years or plan to Florida refinance within that time frame.

3. Interest-Only Mortgages: Fixed-rate and adjustable rate mortgages are available with interest-only payments. This means that during the interest-only period, you can decide whether you want to pay the full interest plus principal or only the interest portion. This can be a very handy option to have when you find yourself a little strapped for cash or you just want to put your money to other uses besides your Florida mortgage.

Ask your mortgage banker lots of questions so that you can be sure to understand how each loan works, and more importantly, what loan is appropriate for your situation.

SOURCE: Quicken Loans