Beginning the Orlando home loans application process can be confusing and a bit overwhelming for any first-time homebuyer. Knowing the ins and outs, the dos and don’ts, and understanding what the different mortgage options are is half the battle for most new homeowners.
So, to help you get started, the Harper Mortgage Team has decided to clear up some confusion by listing the most frequently asked mortgage questions and their corresponding answers.
Question #1: What is the difference between a fixed-rate mortgage and an adjustable rate mortgage?
A fixed-rate mortgage is where your Orlando mortgage lender will provide you a set interest rate on your mortgage that will not fluctuate throughout your home’s amortization period. So, regardless if the local market were to change, your monthly payments would never fluctuate.
An adjustable rate mortgage is where your interest rate fluctuates depending on how the economy is doing, meaning your rates could increase or decrease throughout the loan of your term. This option is most appealing for new homeowners due to the lower initial interest rate offered at closing. However, this option is riskier because you can never fully predict where the market is going to head.
Question #2: What is private mortgage insurance?
Private mortgage insurance (PMI) is a type of insurance that is owed by the borrower if they cannot pay at least 20% of their home’s down payment. This fee is required by lenders to ensure they are protected in case the borrower were to default on their payments.
Question #3: Do you need good credit to qualify for a mortgage?
You do not need to have good credit to qualify for a mortgage. A government-backed loan such as an FHA loan offers low, affordable monthly payments and has a minimum credit score requirement of only 500.
Question 4: What is the difference between an FHA, VA, and USDA loan?
These three loans are government-backed loans, which means the government subsidies these loans to protect the Orlando mortgage lenders in case the homeowners were to default on their mortgage payments. An FHA loan is administered through the Federal Housing Administration and is an affordable option designed for those with a lower income.
A VA loan is administered through the United States Department Of Veteran Affairs and is a mortgage option for active military members, their families, and veterans of the armed forces. This option has a zero down payment requirement and offers low-interest rates.
A USDA Loan is administered through the United States Department of Agriculture and is an option for homeowners located in a rural area. This loan also has a zero down payment requirement and offers affordable monthly payments, however, the credit score requirement is higher than that of an FHA loan.
For more frequently asked mortgage questions or to get started on your Orlando home loans application, please contact the Harper Mortgage Team at 407-614-3095.