Before shopping for real estate in Core San Diego, your first step should be getting preapproved for a mortgage. Of course, this means choosing the right type of mortgage to fit your needs. There are several types of home loans available, each with their own benefits and drawbacks. Here is an overview of the most popular home loans, as well as advice for choosing the right program for you.
Fixed-rate home loans have the same interest rate for the life of the loan. This means your monthly mortgage payment will stay the same for the length of the mortgage. Fixed-rate loans account for most mortgages in the downtown San Diego area, and they’re best for borrowers who want predictability and long-term affordability.
Adjustable-Rate Mortgage (ARM)
An adjustable-rate mortgage has an interest rate that changes or adjusts at fixed intervals. With most ARMs, you have a fixed interest rate for an initial period, frequently 1-5 years. Afterward, your rate will adjust based on changes in the market. An adjustable-rate loan usually offers a lower initial interest rate than a comparable fixed-rate loan, although the trade-off is uncertainty. With interest rates still near historic lows, you can count on your interest rate increasing when the loan resets. Still, ARMs do have advantages. This type of loan may be a good option if you do not plan to be in your home for more than 5 years because you can enjoy the lower interest rate before you’re ready to list the home.
An FHA loan is a government-backed loan program that’s popular among first-time buyers. This type of loan can allow you to buy Gaslamp real estate for sale with a down payment as low as 3.5 percent, and the money may be gifted from a family member. Credit and debt standards tend to be looser with FHA mortgages compared to other loan options. The downside is you will need to pay mortgage insurance premiums that increase the size of your mortgage payments. An FHA mortgage may be a good choice if you don’t have a 20 percent down payment and/or your credit score isn’t high enough for a conventional mortgage.
VA mortgages are offered by the Department of Veterans Affairs (VA) to qualifying military members, veterans, and families. This is one of the few loan programs that offers 100 percent financing, which means you do not have to make a down payment. VA loans tend to have very competitive interest rates and low closing costs. You do need to pay a funding fee of 1.25 percent to 3.3 percent (depending on your down payment and whether it’s your first time using your VA entitlement), but this can be rolled into the loan. If you qualify for a VA loan, it is usually considered the best home loan program available.
Conventional loans are mortgages that are not guaranteed or insured by the government like FHA, VA, and USDA loans. Conventional loans tend to have stricter credit, income, and down payment standards, but they usually cost less in the long run. A conventional mortgage allows you to save the cost of the upfront mortgage insurance premium (MIP) and sometimes the monthly mortgage insurance premium of an FHA loan. Interest rates tend to be lower with conventional mortgages as well. A conventional mortgage may be a good choice with a down payment of at least 20 percent and a credit score of 680 or higher.
Whether you’re interested in lofts in Little Italy or condos in Marina San Diego, it’s important to choose the right type of home loan. A professional real estate who is familiar with the market in downtown San Diego can help you make an informed decision. Reach out to 92101 Urban Living today at 619-649-0368 to see the latest local listings of condos, lofts, and penthouses. ')}