Qualifying for a Mortgage in the Long Beach Island Real Estate Market
When buying a home in the LBI real estate market is important to understand what you need to qualify for a loan. The first step of any home search should be coming up with a plan of how much you can afford and the best way to hold the piece of real estate (LLC, investment home, second home, etc). Understanding the process for qualifying for a mortgage in the Long Beach Island real estate market can help save you time and focus on the right kind of house for you.
Qualifying for a Mortgage in the Long Beach Island Real Estate MarketClick here to search all homes for sale in the Long Beach Island NJ real estate market
Qualifying for a Mortgage in the Long Beach Island Real Estate Market
Every loan is different and every bank will have their own set of requirements however there are a few key points to understand about qualifying for a mortgage in the Long Beach Island real estate market:
- Debt to Income Ratio: This is one of the first things a bank will look at. A debt to income ratio is simply your total debt (credit cards, loans, car payments, etc) divided by your pre-tax gross income. The resulting percentage shows how much income is available to put towards a mortgage.
- Down Payment: The down payment (or the amount of the purchase price you plan to pay for with funds other than the mortgage). The “standard” down payment is 20% of the purchase price however there are many loan products that offer lower down payments.
- Private Mortgage Insurance (PMI): For most loans with less than a 20% down payment, private mortgage insurance will be required. PMI is designed to protect the lender (the bank) against default. The premium is paid up front and does not protect the borrower. PMI can go away once 20% of equity is built up in the property. Most second home loans will require at least 20% down but there are some cases where a lower down payment is possible.
- Interest Rate: The interest rate is the amount charged to you each month based on your principal balance. This is the cost of borrowing money. The interest rate can be fixed or it can be adjustable depending on the loan. This is VERY important as an adjustable rate mortgage may increase substantially if interest rates rise.
Types of Loans in the Long Beach Island Real Estate Market
There are many types of loans available, some with certain conditions that must be met. A few of the more commons loans are:
- Conventional: Generally thought of as a stable loan product conventional loans are very common and offer a fixed interest rate. Second home mortgages or an investment loan often fall under this header.
- Adjustable Rate Mortgage: An adjustable rate mortgage or ARM will generally offer a lower interest rate than a conventional loan but the rate can go up or down depending on the market.
- Interest Only Loan: An interest only loan pays on the interest due and does not pay down the principal balance. Therefore, an interest only loan will NEVER be paid down unless the borrower elects to make additional payments on the principal balance
- VA Loan: A VA loan is administrated by the Veteran’s Association so to qualify for this loan you must have served in the nation’s armed services.
Buying in the Long Beach Island Real Estate Market
There are some excellent buying opportunities in the Long Beach Island real estate market but it is best to understand qualifying for a mortgage in the Long Beach Island real estate market. Without a clear understanding of your personal finances it can be difficult to complete the real estate transaction. I can help you with not only finding the right house for you but also with getting you ready to buy a house in the LBI real estate market so please contact me with any questions!
By : Nathan Colmer | The Van Dyk Group
Cell: 609-290-4293 | Office: 800-222-0131 | ncolmer@vandykgroup.com
Click here to search all homes for sale in the Long Beach Island NJ real estate market
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