Ready to Buy? 10 Financing Options to Consider
Posted: May 27th, 2023
As the market evolves, it's vital to know some of the lesser-used financing options. Be sure to ask your real estate agent or mortgage professional about these when you get pre-approved for home financing.
- Downpayment assistance. Multiple state and local homebuyer programs are available for first-time and repeat buyers. Look into the Florida Bond Program and the new Hometown Heroes (floridahousing.org) program for teachers, healthcare workers and first responders. Go to downpaymentresource.com
- FHA loans. FHA loans have the advantage of requiring only 3.5% for a downpayment and more lenient qualifying guidelines, but they also have mortgage insurance for the life of the loan.
- VA loans. VA loans don't require a downpayment or mortgage insurance. A lender can compare programs to find the best fit.
- USDA loans. Rural Development loans are available in designated areas in Florida that can be checked by a lender or on the loan program's map. These loans have income and loan limits, but they offer a no-downpayment option without mortgage insurance for those who qualify.
- Conventional loans. Buyers can make a downpayment of as little as 3% or 5% even with a conventional loan. Qualifying guidelines are stricter than with government-backed loans, and rates are based on numerous factors, such as the borrower's credit score and loan-to-value.
- ARMs. Some buyers shy away from ARMs because they were associated with the Great Recession, but today's ARMs are typically hybrid loans that are fixed for 5, 7 or 10 years before adjusting. There are caps on how much the loans can adjust annually after the fixed period and over the life of the loan.
- Assumable loans. Only government loans are assumable, not conventional loans, but even FHA and VA assumable loans are rare these days.
- Bank statement loans. Borrowers who are self-employed or rely on investment income may have trouble qualifying based on tax returns, so some lenders offer loans based on other documentation such as bank statements or asset accounts.
- Buydowns. Buyers with extra cash can consider buying down their mortgage rate for the first two years. For example, a buyer could buy down their rate by 2% or 3% the first year, 1% or 2% the second year, and then the rate would stabilize to the original rate for the remaining loan term.
- Seller credits. Buyers can ask sellers for closing cost assistance depending on the loan guidelines. Another option is to ask the sellers to contribute to a mortgage rate buydown rather than lower the price.