SWFL Custom Homes Blog
A Quick Guide to Getting Financing For Your New Home
When thinking about buying a new home, many people balk at the prospect of getting financing. And we don’t blame them. For a first-timer, the process can feel complicated and intimidating.
But it doesn’t have to be. Getting financing for your new home can be fairly simple when you’re informed about the basics. In this post, we answer the top questions about getting a mortgage and give you tips on how to secure the best financing deal.
How Do I Calculate My Mortgage Amount?
When it comes to financing a new home, it’s not uncommon for first-time buyers to forget that their mortgage shouldn’t just cover the home’s selling price. There are many other costs associated with purchasing and moving into a new house, and those will need to be factored into the total amount that you ask for.
These other home-buying costs can include:
- Loan origination fee
- Real estate transfer tax
- Primary mortgage insurance (PMI)
- Property taxes
- Miscellaneous service fees
- New furnishings & appliances
- Materials & labor for repairs
- Renovations & new installations
After you tally up the total of the various associated costs, you’ll need to assess how your down payment amount will determine your monthly payment. A larger down payment will reduce your monthly, but it can deplete much-needed savings. Do your best to strike a balance that doesn’t strain your budget in day-to-day life.
You can use loan calculators on sites like Investopedia and NerdWallet to figure out how much your monthly payment will amount to with different loan totals and down payment amounts.
What Do I Need to Get a Mortgage?
You may feel ready to take on a mortgage, but convincing lenders is another story. There are certain qualifications you’ll need to get a mortgage, varying by the specific type of loan and lender you opt for.
According to Investopedia, the majority of conventional mortgages call for a ≥620 credit score. But you can still get an FHA loan with a score as low as 500 and a 10% down payment, or even 580 with a 3.5% down payment. Count on being asked for proof of income spanning at least 2 years and being held to a certain income requirement.
It is possible to get a mortgage without a down payment or a low income. You’ll typically need to go through specialized first-time homebuyer programs to access these deals.
What Type of Mortgage Loan Should I Get?
The type of loan that’s best for you will depend on your circumstances and qualifications.
These traditional loans are offered via private banks and financial institutions. They usually have the highest standards for applications. But they also tend to be the most affordable in terms of interest rates.
Government (FHA) Loans
You can get a mortgage loan directly from the Federal Housing Administration (FHA). The FHA has several different programs available for homebuyers, all with their own particular stipulations. Generally speaking, FHA loans are easier to qualify for, have fewer upfront costs, and are much more lenient on down payment minimums, but they do require paying an insurance premium to secure the debt.
The federal government also offers specialized mortgage programs to U.S. service members, veterans, and qualifying surviving spouses. Accessed via the Veterans Administration, VA loans do not require any down payment. They also have the benefit of low interest rates and closing costs.
Who Should I Choose as My Lender?
If you’re planning to get a conventional loan, or are getting a government loan fulfilled by a private lender, you’ll need to pick a financial institution that is fair and trustworthy. Nerdwallet has compiled a list of tips, as well as rankings of reputable lenders.
The lender should be communicative, giving you full information and transparency whenever discussing the loan’s terms. They should also be able to give clear timelines for completing each stage of the purchasing process.
Size and scope of the bank should be considered as well. While big banks may offer lower interest rates, small local institutions are also highly competitive, and can often provide better flexibility for your loan terms. Regional credit unions, for example, are frequently much easier to qualify with than the giant corporate banks.
Get Help Finding & Financing Your New Home
Here at Capitol Homes, we can not only build your perfect home, but help you finance it too. We have established a strong network of local lenders, allowing us to connect you with the best opportunities for getting a great deal on your mortgage.
Read our FAQ to learn more about our process. If you’re ready to get started, we invite you to take a look at our floor plans and set up a consultation. We’ll help you figure out if a custom home is right for you, and give you all the information you need to feel confident about making your purchase.
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