Time may be up on the home buyer tax credits, but you may hear “it’s still a great time to buy a Fremont home”. Why? Because interest rates on home loans are low and, most likely, have nowhere to go but up.
Smug Fremont home owners love to extol the virtues of buying, but you should never take the decision to buy a home lightly. Renting is not wasted money (especially if you’re investing what you’re saving).
That said, the current Fremont real estate and home loan market is enticing. Homes are cheap, and so are home loans. But before you commit to a debt that will likely take 15 to 30 years to repay, familiarize yourself with the basics of Fremont home loans.
Today, most Fremont buyers have to get a home loan the old school way. That means good credit, a stable (and verifiable) income, and—with some exceptions like FHA loans—a fair-sized down payment. But what, exactly, are your options?
Fixed-rate Mortgages
Fixed-rate mortgages are the simplest and most widely-available Fremont home loans. You can typically get fixed-rate mortgages for 30, 20, 15 or even 10 year terms.
To qualify, you’ll need a minimum credit score in the high six hundreds and a down payment of between five and twenty percent depending on things like your credit and your local housing market. If you don’t put twenty percent down, however, you’ll need to pay a bit extra every month for private mortgage insurance until you establish 20 percent equity in your home.
Personally, a fixed-rate mortgage is the only kind of home loan I would consider right now. The rate is guaranteed to stay the same for the life of the loan, so you’ll never be surprised by a higher monthly payment.
Adjustable-rate Mortgages (ARMs)
ARMs come in myriad varieties, some of them toxic. Two ARMs that aren’t always so bad are 5/1 year and 7/1 year ARMs. That means the interest rate will stay fixed for the first five or seven years of the loan and then adjust every year for the remaining life of the loan. These loans typically have lower interest rates and closing costs than fixed-rate loans, but carry the risk that interest rates will go up (and right now, they probably will). ARMs are quite attractive, however, to buyers who believe they will only live in their house for a few years.
FHA Home Loans
The Federal Housing Administration (FHA) is a government agency that guarantees Fremont home loans, allowing mortgage lenders to offer loans to borrowers with lower credit scores and smaller down payments than they would ordinarily accept. Generally, borrowers with credit scores in the lower six hundreds can qualify for FHA loans with as little as a 3.5 percent down payment. The FHA caps on how much you can borrow depending on where you live and if you want to buy a condo, the building must be FHA-approved.
Although FHA loans provide a responsible path to home ownership for borrowers with modest incomes, credit scores, and savings, I put them in the so-so category because I simply think the 3.5 down payment required isn’t enough. I understand not everybody can save tens of thousands of dollars, but buying a home with so little equity and, most likely, little cash left in the tank for emergencies, is a risk I don’t recommend taking.
Jumbo Loans
With the exception of a few pricey markets where the FHA has high borrowing limits, if you want to borrow more than $417,000, you’ll need a jumbo loan. It’s possible, but you’re going to need a mid-700s credit score and at least twenty percent down. Getting approved can be tricky and rates can vary widely among lenders, so it’s best to shop around for the best mortgage.
Thank you for taking the time to read the information I have made available to you. This information is brought to you by your Fremont real estate expert Clyde Brown. If you are considering buying or selling property, planning to relocate, looking for Fremont homes for sale, or looking for any other information about real estate in the Fremont real estate market, or the surrounding areas, please visit the most complete website dedicated to everything real estate related www.ClydeBrownHomes.com.
If you or someone you know are in need of a competent and experienced Bay Area Realtor, or have real estate or mortgage related questions, please feel free to contact me I will be more than glad to answer your questions. Call me at 800-839-0665 or email me at Clyde@ClydeBrownHomes.com. For all your East Bay cities needs including Fremont, Newark, Union City, Hayward, Oakland, Santa Clara, Milpitas, Dublin, Livermore, Pleasanton, and San Ramon. Clyde Brown Legacy Real Estate & Associates.
