If you're even remotely considering buying a Gulf Shores home, there's no time like the present. The clock is ticking, and soon, getting a mortgage will likely become more difficult and more expensive.
Loan limits for popular mortgages are scheduled to drop in January 2014. The Federal Housing Finance Agency is planning to slash the maximum size of mortgages eligible to be backed by Fannie Mae and Freddie Mac, which currently run as high as $417,000 in most parts of the country and up to $625,500 in pricier cities.
People who need bigger loans will have to go to private lenders, who want low-risk, affluent borrowers who can make a bigger down payment of 25 percent to 30 percent. Private lenders, include many banks, credit unions and independent mortgage lenders, originate mortgages under their own terms and in most cases hold the loans on their books. Most are very selective, seeking out affluent borrowers who present little risk of default.
Buying a Gulf Shores Home – ARM's May Be The Only Option
Applicants buying a Gulf Shores home who qualify for private mortgages could find that adjustable-rate home loans are their only option. With ARMs, borrowers have a fixed rate for a set period of time – often five years – before rates become variable. ARM origination in the private market is already on the rise.
Private mortgages tend to charge higher interest rates than Fannie Mae and Freddie Mac-backed loans. But increased lender appetite for private mortgages has helped lower their rates, which are hovering near and in some cases lower than rates on government-backed mortgages for people buying a Gulf Shores home.
It's easy to make mistakes when buying a Gulf Shores home and looking for a mortgage for that home.
Problems to Watch For When Getting a Mortgage
1. Check your credit before you let a lender look at it. Clean up any problems you find on your credit before a lender sees it, and you'll be offered a better deal. If a lender sees problems, it's a sure thing that your rate will be higher.
2. While they're still available, get a pre-approval letter before you start shopping. Many lenders are getting away from giving out these commitments, but while you still can, get pre-approved for a mortgage before you start looking at buying a Gulf Shores home.
3. Shop for the best deal on your mortgage. Don't just assume you're getting the best rate possible with the first lender you talk to. It pays to shop around for a mortgage a lot more than you do when buying gasoline for your car.
4. Don't just focus on rates. Learn about all the fees a lender can throw at you. Mortgages are often loaded with fees, and these fees can cost you money if you don't shop these as well.
For more tips and articles on buying a Gulf Shores home, click over to our Gulf Shores Home Buyer Tips section under Gulf Shores Real Estate Categories to your right.