The very first step you should take when preparing to purchase a home is to speak with a mortgage representative. It makes no sense to look at homes that you cannot afford, and you may find you can get a nicer home than you thought you could.

When speaking with a mortgage rep, he/she will pull a credit report and ask about your available cash down payment, debts and income. This will allow the rep to tell you whether or not you can qualify for a mortgage, and if yes, for how much.

Credit scores

These are usually in a range from 850 on the high end to 450 on the low end. A score of 720 or above will usually result in the best interest rate, lower scores will probably result in a higher interest rate. a score of 620 or below will probably result in not qualifying for a mortgage.

FHA Financing 

An FHA insured loan is mortgage that is guaranteed by the Federal Housing Administration. The FHA does not issue the mortgage, you need to apply to, and qualify with an FHA-approved lender Borrowers who cannot afford a traditional down payment of 20 percent or can’t get approved for private mortgage insurance should look into whether an FHA loan is the best option,  Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan. Minimum credit scores apply.

This program allows buyers to purchase a home with a minimum down payment, as little as 3.5% of the purchase price. Depending upon your credit score, a higher down payment may be required. Also, you are allowed to make a larger down payment.

FHA buyers can use their own savings for the down payment, but a cash gift from from a family member or a state or local grant is allowed. The FHA also allows the seller to pay some or all of the closing costs.

An FHA backed mortgage can be used on virtually all 1-4 family homes detached homes, most townhouses complexes and condo complexes that are approved for FHA financing. Not all condo complexes are approved, your Realtor can tell you if the one you’re interested in is FHA approved or not

Conventional Financing

A conventional loan is not guaranteed by a government agency, therefore the risk for the bank or mortgage company is greater. The end result is that a higher down payment is required, typically 20% of the purchase price. The benefit is that Mortgage Insurance is not required, which can result in a savings of possibly hundreds of dollars per month.

Typically, a conventional mortgage has a 30 term, the time in which the entire balance must be paid. Many mortgage lenders also off 3, 5 7 or 10 years balloon mortgages, in which the payment is based upon a 30 year payoff, but at the end of the period the mortgage must be paid in full or extended at the current interest rate, which may or may not be higher than the original note. These balloon mortgages often offer a lower interest rate.

There are also variations of conventional financing that allow you to purchase a home with less than 20% down. Please speak with your mortgage rep for details.

VA Financing

The benefits of the VA mortgage allow service members and Veterans to take advantage of substantial cost savings under qualification requirements designed specifically for members of the military and their unique needs. Homes can be purchased with no money down and no mortgage insurance.  Please speak with your mortgage rep for details.

Grants

There is a grant from Monmouth County that is sometimes available to qualified buyers. The grant is typically for $10,000 in the form of a second mortgage, the mortgage is forgiven if you still own the home after 5 years. The basic requirements are:

You must have been living in Monmouth County for at least 1 year

You must be either a first time buyer or a displaced homeowner

Income requirements apply

Please speak with your mortgage representative for details.