Q&A with Tom Rosser: Dozens of loan types available to homebuyers
What does the current housing market look like?
It's booming nationwide. Unemployment is the lowest it’s been in nearly 50 years, younger generations are beginning to accumulate wealth and start families, and the overall economy is growing — spurring many Americans to buy homes. The share of American households that own their homes increased during the second half of last year and we expect that trend to continue throughout 2020.
What factors determine how much home a buyer can afford?
The best starting point is to speak with a local mortgage banker to obtain a pre-qualification letter that outlines the expected amount, based on your income and debt. This is called your debt ratio, and some loan programs are more flexible than others. Your credit score will be used to determine qualification and may impact your interest rate. Lenders also may analyze your repayment history to evaluate your likeliness to make future payments on time.
What’s included in a total monthly mortgage payment?
Mortgage principal, or the actual amount borrowed to purchase your home and the amount owed to the lender; the interest on the loan; private mortgage insurance, which offsets lender losses in case the loan can't be repaid; and homeowners insurance and property taxes.
What's the best type of mortgage?
There are dozens and the best mortgage is different for everyone. The two main types of loans are government insured mortgage loans and private conventional loans. The former include FHA, which offers fixed-interest rates and lower down payments, making it ideal for first-time home buyers with less savings, and VA, which offers little to no down payment, no mortgage insurance requirements, flexible qualification and fixed rates, specifically for active military veterans and qualifying spouses. Conversely, private loans are the traditional type of loan with 10-year to 30-year options. It's beneficial if you have established credit history and are looking for a long-term home.
Paula Burkes, Business writer