Navigating the mortgage market

In culturally diverse Florida, the American Dream of homeownership takes many forms. No longer just the traditional single-family home, it could be a duplex for additional income, a townhome or condominium where the landscaping and maintenance are provided, or maybe a funky loft in a neighborhood that’s being recharged. Owning your residence instead of paying rent remains a good investment and creates a tax advantage.

Just as you shop for the right home, you should shop for the right mortgage. A fixed-rate mortgage is usually for 15 or 30 years and is good for people who plan to stay in their homes for most of the life of the loan. Adjustable-rate mortgages (ARMs) are usually lower than fixed-rate loans but the rate remains set for only about five years before adjusting annually. These are good for people who think they might move in five years or less, and for people with lower credit scores who can’t get favorable fixed rates. The initial ARM period gives them a chance to improve their credit scores. Both fixed and adjustable mortgages require down payments, usually 20%; anything less requires Private Mortgage Insurance (PMI) to cover the difference.

Adjustable-Rate Mortgage vs. Fixed-Rate Mortgage Calculator

Federal Housing Administration (FHA) mortgages are government-backed fixed-rate loans with down payments as low as 3.5 percent, and they are good for people who don’t have a lot of savings. They do require PMI for the life of the loan. Veterans Administration (VA) mortgages allow military veterans to buy homes with no money down and no PMI, but it must be your primary residence and it has to meet certain standards.

A USDA mortgage is available in rural areas and offers benefits similar to an FHA mortgage, but there are debt limits. Also, some commercial lenders offer interest-only loans in certain circumstances, so do your homework.

Buying your first home can seem daunting, but it doesn’t have to be.

Five Tips for Buying Your First Home

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