Quick Guide to Florida Mortgages

With the drop in housing prices due to the mortgage crisis, now may be the perfect time to purchase a home. Let's explore some of the different types of Florida mortgages that exist to ensure that the loan meets the needs of the prospective buyer.

Fair Housing Authority (FHA) Loans

FHA loans serve two main client bases, the first time homeowners, and those individuals who have previously owned a home but have less than perfect credit. If you qualify for an FHA loan, you will find reasonable interest rates, a low down payment, and the backing of the federal government. While most mortgage companies require a minimum down payment of ten percent of the home's selling price, FHA requires only 3.5 percent. The minimum FICO score (credit rating score) required is 620. This lower threshold allows individuals who, like most people, have made late payments in the past to still qualify for a mortgage today. The FHA also works with individuals who have been on their job less than two years, and those who are self-employed. Finally, because the mortgage is insured through the FHA, lenders are able to offer lower interest rates.

Veterans Administration (VA) Loans

An adjustable-rate mortgage changes interest rates periodically. The interest rate is tied to an index. When the index rises, the interest rate rises correspondingly. When the index lowers, the interest rate may or may not lower correspondingly. Mortgage lenders attach a margin to the index in order to determine the annual interest rate each year for the loan.

VA loans serve active duty and retired military personnel. The VA recognizes the sacrifices made by our military personnel by offering them an affordable mortgage. Proof of service record is required to start the VA Loan process. Through the VA, qualified individuals may finance one hundred percent of the home's purchase price. Eliminating the down payment gives our military personnel the opportunity to purchase the home that they dreamed about while on active duty. As with FHA loans, the minimum FICO score required is 620, allowing for those veterans with imperfect credit to qualify for this program.

Conventional Loans (Fannie Mae and Freddie Mac)

Conventional loans that meet the funding criteria for Fannie Mae and Freddie Mac comprise thirty-five to fifty percent of all mortgages. Currently, the Orlando mortgage maximum for a conventional loan is $417,000. Of course, you do not need to borrow the full amount in order to qualify for a conventional loan.

Conventional loans come in two main types - fixed-rate and adjustable-rate. You have probably heard quite a bit of negative press about adjustable-rate mortgages, as they have been the focus of the recent spate of foreclosures. However, each homeowner should consider his personal needs and goals before choosing his mortgage.

The most common fixed-rate loan is a thirty-year mortgage in which the interest rate remains the same throughout the life of the mortgage. A fixed-rate loan is especially attractive when the interest rates are low, and can be locked in for the duration of the loan. Fixed-rate mortgages are most beneficial for individuals who plan to spend ten or more years in their home.

Adjustable-rate mortgages are most beneficial to those individuals who do not plan to keep their home longer than seven years, and can therefore benefit the most from the current low interest rates.