Mortgage Choices for First-time Homebuyers
Considering different mortgage choices for your first home? You're not alone.
Nationwide, about a third of homebuyers are buying their first homes. As real estate agents, we take genuine delight in the energy and excitement that house-hunting inspires in our clients. And it’s no wonder they’re enthused—there are thousands of beautiful properties in the Jacksonville area.
But we’re also keenly aware of the confusion and anxiety that kicks in when it comes to shopping for a home loan. That’s why we’ve put together this primer on mortgages: to help you become better informed and, we hope, a little more relaxed about diving into this complicated process.
Mortgage Types: You Have a Lot of Choices
The best mortgage for you will vary depending on how you answer certain questions. For example, how much do you want to borrow and for how long? How large a down payment are you considering? Are you buying a single-family home or a multi-family rental property?
Each of these factors can make one mortgage a better choice for you than the others, but it helps to know a little about all of them as you begin your search.
“Conventional mortgage” is a broad term that encompasses any loan that conforms to the standards set by the Federal Housing Finance Agency. You’re probably familiar with that government agency by its acronym, FHFA, and its charter organizations Fannie Mae and Freddy Mac.
The FHFA’s mission is to keep the mortgage industry safe for consumers and financially sound over the long term. Last year in most parts of the country, loans under $484,000 (for a single residency) qualified under FHFA guidelines as conventional mortgages. But that figure is subject to change annually and limits may be higher in states where the cost of living is higher than average.
Jumbo mortgages fall outside the dollar limit set by the FHFA. If you are considering oceanfront properties in the Jacksonville area, you might need a jumbo mortgage.
Government-backed mortgages are some of the lowest-cost mortgages you can get. Only veterans and eligible service members can qualify for VA loans which offer quite a few benefits when compared with conventional mortgages. Some loans are available with little or no down payment.
With conventional loans, if you don’t meet certain down payment criteria, you are required to pay Private Mortgage Insurance (PMI) until you have equity equal to 20% of your loan.
PMI can add a significant amount to your monthly mortgage payment. If you haven’t been
saving for long, VA loans can still make you a homeowner.
USDA loans offer similar benefits to VA loans and are reserved for homebuyers who settle in designated rural areas. Some properties nearby but outside Duval County proper may qualify for USDA loans.
FHA loans offer down payment options as low as 3.5%. Some will even allow you to roll the cost of energy-efficiency home improvements into your mortgage. If, for example, you find a home you love and it needs an HVAC system upgrade, an FHA loan can help you get it.
Mortgage Lenders: Gatekeepers to Your New Home
The best mortgage lender for your needs depends on the type of loan you’re looking for, how strong your credit is, and frankly, your style of doing business.
Traditional banks—you know, the type that provides you with checking and savings services—are a fine place to start your search for a mortgage. Chances are, your bank’s staff knows your name and your face. They’re paid to be helpful and to encourage you to do more business with them. Traditional banks also offer the opportunity to sit face-to-face with a mortgage expert. You can easily get a lot of questions answered that way. Traditional banks can be your gateway to most mortgage types, including government-backed loans.
Credit unions operate like traditional banks in some ways. But when it comes to writing mortgages, they present some distinct advantages to their members. If you’re thinking of buying a home, joining a credit union can be a smart first step. Credit unions are nonprofit institutions that prioritize giving great service to their members. They’re not required to meet corporate income mandates so they often offer lower rates than traditional banks. They’re also more likely to loan to members who don’t meet the high credit score criteria set by other lenders.
Mortgage brokers act as middlemen between you and the wide world of mortgage retailers. Once you’ve amassed the paperwork required to apply for one loan, brokers can distribute it to a number of lenders in short order. If managing paperwork isn’t your forte, or you simply don’t have the time for it, a mortgage broker might be the best solution for you. Mortgage brokers also maintain relationships with lenders who are willing to take on more risk and can often find you a mortgage if your credit history is a little shaky. You may not get as much hand-holding when you work with a mortgage broker as you might through your local bank, but some people actually prefer a little distance.
Online lenders offer a different kind of distance altogether. As entrenched in the digital world as we’ve all become, it’s not surprising that the largest mortgage company in the US has no brick-and-mortar presence at all. It’s just you and your laptop when you work with an online lender. That can be ideal when you don’t have time for face-to-face meetings, or even phone calls. Online lenders shorten the application process, too. Once you provide them some basic information, they can gather a lot of your financial data electronically. They tend to provide
quicker approvals (and denials) than other lenders, which helps when you’re negotiating with home sellers. Even if you don’t choose to do business with an online lender, most online lending sites feature handy comparison-shopping tools.
Plus, in the final analysis, shopping around is the best route to finding a great mortgage deal.
If you’re looking for a reputable local lender to work with to purchase a new home or to invest in a multi-family home in the Jacksonville area, email us at email@example.com for a list of up to date recommendations.
We’ve been on the Jacksonville real estate scene for years now, and have had the opportunity to work with some of the best mortgage lenders in the business. We’re happy to introduce you and help you move toward your goals with a seasoned professional.
Susan DoktorSusan Doktor is a freelance writer and marketing consultant who hails from New York City. She writes about a wide range of topics, from finance to food and wine. Her passions are her vintage 1910 Arts & Crafts-style home and all aspects of design. Her favorite place to visit in Florida is St. Augustine, just a hop, skip and a jump from Jacksonville.