Best Loans for First Time Homebuyers

  • 07 Oct 2014
  • Posted by estarr

First Time Homebuyer

You've decided to purchase your first house - congratulations! You’ve hired a real estate agent and a few weeks later you find your dream home. Now you need to get the loan process started, so you research and choose a lender and before you know it you are in their office filling out papers and talking numbers.

This is the part where you will likely have numerous choices on which loan program works for you. Some programs have mortgage insurance, while others do not. Some programs require greater down payments, while others require less money down. How do you decide which program fits your needs as a first time homebuyer? Read below to sort through three of the most popular home loans.

1) Conventional

A conventional loan is what is sometimes known as a “traditional” loan. It is not guaranteed or insured by any government agency. Conventional loans do require a down payment, typically 5 percent or more. These home loans are often insured by private mortgage insurance if the down payment is less than 20 percent of the value of the property being financed. However, PMI (private mortgage insurance) can “drop off” when the loan balance is scheduled to reach 78 percent of the original value of the home. So PMI won’t have to be with the borrower forever with a conventional loan.

2) FHA

An FHA 203(b) home loan is a very popular first time home buyer loan option. This type of loan is insured by the Federal Government, and lenders are able to provide a borrower with competitive interest rates as a result. Credit score and credit requirements are generally more lenient than they are for a conventional loan. An FHA loan only requires a 3.5 percent down payment, which is the smallest amount down of any loan program, except a VA loan. However, FHA loans also require mortgage insurance, which will never drop off unless you refinance out of an FHA loan.

3) VA

In 1944, the U.S. government created a military loan guaranty program to initially help returning service members purchase homes. Since then, the program has helped more than 20 million veterans and their families with an affordable home financing situation. The VA loan has distinct advantages over traditional mortgages, such as requiring no down payment, competitive interest rates, and no mortgage insurance. However, you must meet eligibility requirements to qualify for a VA home loan. If you are active military or veteran, a VA home loan may be the right solution for your first time home buying needs.

As you can see, there are a variety of loan choices to consider when purchasing your first home. It is important to speak with your loan specialist about all of your potential options and find a loan program that fits your particular situation the best.

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Traditonal vs. Roth IRAs: How to Choose

  • 27 Jan 2014
  • Posted by estarr

Roth vs Traditional IRAs

One of the most frequent questions asked to our 1st Mariner Financial Advisers is regarding the choice of a Traditional or Roth IRA*.

It is complicated...

At first glance, the Roth IRA is very appealing since it offers the long term investor the ability to withdraw funds TAX FREE (after age 59 ½, a holding period of 5 years or for very specific exception situations). Investors must bear in mind that the Roth does not offer the possible tax deduction of the Traditional IRA.

In reality, it usually comes down to numbers. However enticing the idea of the Roth IRA may be, in many situations an investor is better off contributing to a Traditional IRA.

Therefore, the first step in deciding which IRA is better for you, is to determine if you are eligible to contribute to a Roth IRA. (There are strict income limits which apply to Roth IRAs.) Higher income earners have IRS-imposed limits governing their ability to make a Roth IRA contribution. For example, in 2014, individuals earning $112,000 and couples earning $178,000 begin to have their dollar amount contributions limited and ultimately phased out at higher income levels.

There are many online calculators offered that assist you in making the decision. I urge you to take the time to work through this calculation! The calculator can determine your eligibility and project the long term values of both a Traditional and Roth IRA using your age, salary, percentage contribution and expected rate of return. These values are only projections, but you owe it to yourself to complete the exercise. It is your future!

Both types of IRAs offer similar contribution amounts and investment options.

These are but a few of the many considerations in your retirement planning. For most individuals, their 401(k)s and IRAs represent the single largest part of their net worth (aside from personal residence); I urge you to seek the guidance of a financial professional in making these important decisions.

*Not insured by FDIC or any Federal Government Agency.

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