- May 20, 2018
- Posted by: steve
- Category: mortgage news
Are you considering a move to the Sunshine State?
If so, you’re in good company. In fact, the average American moves 11 times in their lifetime.
And whether it’s for work, retirement, or the weather, there are ample reasons to relocate to Florida.
Palm Beach County, in particular, is known for its beautiful beaches, fine restaurants, and outdoor lifestyle. But before you call the moving company, you first need to find your new home.
What should you know about Palm Beach real estate? What types of mortgages are available? And where can you find the best local mortgage company?
Read on for everything you need to know about Palm Beach real estate.
Types of Florida Mortgages
To begin, let’s discuss the most common mortgage options and the pros and cons of each.
1. Fixed-Rate vs. Adjustable Loan
One of the main factors to consider is the type of interest rate you’re comfortable with. Do you want the security of a fixed rate, or are you willing to take chances with an adjustable rate?
Fixed-Rate Mortgage Loans
This is one of the most common and traditional types of mortgages. You’ll pay it off over a set amount of time at a specific interest rate.
You can choose to pay off your fixed-rate mortgage loan over:
- 10 years
- 15 years
- 20 years
- 30 years
A 30-year loan is the most popular type. Market rates can rise and fall during that time, but your interest rate stays the same.
Many homeowners like the security of a fixed-rate loan, as they don’t have to worry about rising costs at a later date. This makes it easy to plan and stick to a housing budget.
Adjustable-Rate Mortgage Loans (ARMs)
The alternative to a fixed-rate loan is an adjustable mortgage loan. Also called an ARM, these loans feature a lower introductory interest rate that fluctuates over time.
The most common types of ARMs are:
- 3/1 ARM: Set interest rate for 3 years, annual adjustment for 27 years.
- 5/1 ARM: Set interest rate for 5 years, annual adjustment for 25 years.
- 7/1 ARM: Set interest rate for 7 years, annual adjustment for 23 years.
- 10/1 ARM: Set interest rate for 10 years, annual adjustment for 20 years.
Why would you choose an ARM over a fixed-rate loan? If you’re not planning to keep your home for decades, you could take advantage of the lower interest rate. This could also be a smart option if you plan to refinance.
If you’re on a very tight budget or you don’t want to risk refinancing, you might be better off with a traditional fixed-rate loan.
2. Conventional vs. Government-Issued Loan
The two loans listed above are both considered conventional loans.
A conventional loan is not backed or guaranteed in any way by the federal government. This means that you, the homeowner, are responsible for all payments on your Palm Beach real estate.
Another option to consider is a government-backed mortgage loan. If you qualify for one of these loans, they may offer significant advantages.
Federal Housing Administration (FHA) Loans
These loans are a popular choice for first-time home buyers. They’re ideal for those who don’t have enough for a large down payment or who have less-than-perfect credit.
Through the FHA, the government insures the lender against losses if the borrower defaults on the loan. Currently, the Palm Beach real estate mortgage limit on single-family homes is $345,000.
With an FHA loan, you may qualify for a down-payment as low as 3.5% if your credit score is 580 or higher. If your credit score is between 500 and 580, you may still qualify for the loan with a 10% down-payment.
This loan is a terrific option if you don’t have the money for a big down-payment. Because of fees and mortgage insurance, though, your monthly payments will be higher than with a conventional mortgage.
Veterans Administration (VA) Loans
Like the FHA loan, VA loans are backed by the federal government. If you or a family member is a qualified veteran, this loan option is one of the best available.
A huge advantage of the VA mortgage loan is it requires zero down-payment. Eligible borrowers receive 100% financing on their home purchase.
You also don’t have to worry about mortgage insurance, which further reduces your monthly payments.
Not all Palm Beach real estate sits on oceanfront property. There are plenty of options available inland, too.
For rural borrowers who meet the income requirements, a USDA loan might be a perfect choice. The Rural Housing Service (RHS), part of the US Department of Agriculture, oversees the program.
The USDA loan is designed to help low- or moderate-income families buy or renovate a house in rural areas. In some cases, suburban areas may qualify, too.
If you qualify for a USDA loan, you can buy your home with zero down-payment and enjoy below-market mortgage rates.
3. Conforming vs Jumbo Loan
The final option to consider with Palm Beach real estate is whether you need a conforming or jumbo loan. What’s the difference?
Conforming loans follow Fannie Mae and Freddie Mac’s guidelines. These include income, credit, assets requirements, and loan amount.
The current limit for single-family homes in most parts of the country, including Palm Beach real estate, is $424,100.
What if the home you’re considering exceeds this limit?
As the name suggests, a jumbo loan or non-conforming mortgage allows you to buy a more expensive home.
If you can afford it, jumbo loans offer terrific flexibility that conforming loans don’t have. For example, you may not be required to buy mortgage insurance.
A disadvantage of jumbo loans is they usually come with higher interest rates. They usually require large down-payments and excellent credit, too, which may make them difficult to qualify for.
Final Thoughts on Palm Beach Real Estate
As you can see, there are many options available to you when it comes to buying a home in Florida.
Now that you know more about the different types of mortgage loans, you’re one step closer to making the move.
Are you ready to get started on your journey to homeownership in Florida?
Click here to use our free home loan pre-approval tool and find out how much house you qualify for.