Interest Rate vs. APR: What You Need to Know Before You Buy a Home in Orlando

When you’re buying a home for sale in Orlando, whether it’s at Alaqua Country Club, Bay Hill Club or Heathrow and Legacy Clubs (or anywhere else, for that matter), you’re probably going to take out a mortgage loan – most people do.

But you’ll see terms like interest rate and APR, and they can get pretty confusing. This article breaks down the differences between your regular interest rate and APR, as well as explains why you need to know about both.

Interest Rate vs. APR: What You Need to Know

This guide will show you the difference between your APR and your interest rate – and why one is higher than the other is.

What is an Interest Rate?

Your interest rate is the percentage you’ll pay each day on the money you borrowed. It benefits the lender – it’s what they get for loaning you the money to buy a home. It’s expressed as a percentage, not a dollar figure, and it doesn’t reflect anything but what you’re paying the lender for borrowing money.

A lot of factors go into your interest rate. On the open market, interest rates go up and down every day (kind-of like oil prices). The day that you lock in your mortgage interest rate is the only day you need to worry about, though – it doesn’t matter where interest rates go the next day or the next week (provided you don’t have an adjustable-rate mortgage).

The factors that go into what interest rate you qualify include:

Your credit score. The higher your credit score is, the better interest rate you’ll probably qualify for.
Your down payment amount. When you put more money down, lenders are assuming less risk by letting you borrow money – and they reward you with a lower interest rate, in many cases.
The loan type you’re getting. Your interest rate will depend on the type of loan you’re using.
Your loan term. The term of your loan – how long it lasts – will have an effect on your interest rate.
Whether you’re getting a fixed-rate or adjustable-rate mortgage. With a fixed-rate mortgage, your interest rate doesn’t change over the life of the loan. But with an adjustable-rate mortgage, your interest rate will stay the same for a few years (usually 3, 5, 7 or 10, depending on what you choose when you sign up for it) and then fluctuate annually with the market. It could go up or down, raising or lowering your monthly mortgage payments.

What is an APR?

APR stands for annual percentage rate. It’s a broad measure of the cost of borrowing, and like a regular interest rate, it’s expressed as a percentage. It determines the total amount you’ll pay each year over the entire loan.

Your APR includes the interest rate on your mortgage, discount points you paid to lower your interest rate, loan origination fees and other costs of borrowing money from a lender, so it appears higher than your regular interest rate does. The higher your APR is, usually, the higher your mortgage payments are for the entire time you have your loan.

Are You Buying a Home for Sale in Orlando?

If you’re thinking about buying a home for sale in Orlando or any of the surrounding communities, we’re here to help. Call us at 407-529-4621 right now to tell us what you’re looking for!

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How to Boost Your Credit Score to Buy a Home

If you’re buying a golf course home for sale in Orlando or any of the surrounding communities, you know that you need to get your credit score as high as possible before you apply for a loan.

But where do you even start?

How to Boost Your Credit to Buy a Home

When you apply for a mortgage loan to buy a house in Orlando or elsewhere, your lender will look at your credit score. Here’s what they see:

You can get a free copy of your credit report, thanks to the Federal Trade Commission, here: https://www.annualcreditreport.com/index.action

Once you get your credit report, you can check to see what your creditors have reported about you – and you can dispute errors to raise your score.

If your credit score is below 680, you’ll most likely have to take a few steps to improve it so you can avoid paying extra fees or higher interest rates. You may also have to come up with a larger down payment (unless you’re using a federal or state program, such as a VA loan or first-time homebuyer program) if your credit is less-than-perfect.

Your credit history makes a huge impact on your credit score. Here’s the breakdown:

35% = payment history (on-time, late, and seriously late payments)
30% = amounts owed in proportion to the amount of credit you have
15% = length of credit history, with a longer history being more favorable
10% = credit mix you’re using, which should reflect several types of credit (car loans, personal loans, credit cards and other revolving obligations)
10% = new credit or new applications for credit

Stop applying for new credit at least a year before you apply for a home loan. Part of your credit score involves how much new credit you’re trying to get. If you’re applying for all kinds of new credit, it may appear that you’re short on cash and can indicate that you’ll have a tough time making mortgage payments.

5 Tips to Improve Your Credit Score

#1: Open a new credit account.

If you open up a new line of credit and it increases your total outstanding credit line, your utilization scores (the part of your score that relies on how much you owe in relation to the amount of credit people are willing to give you) will improve. Bonus points if it’s a type of credit you don’t already have, which will improve your scores in the “credit mix” department.

#2: Dispute all the errors on your credit report.

If you don’t have any errors, that’s great – skip ahead to tip #3.

#3: Pay down your debts as much as you can.

You’re looking to improve your debt-to-income ratio, so the less debt you have, the better.

#4: Get – and keep – your bills current.

Paying on time has a huge impact on your credit scores. Even if it means making small payments throughout the month ($10 here, $25 there), make sure everything is paid on or before its due date.

#5: Become an authorized user on someone else’s account.

The key is picking someone responsible with good credit – his or her full history from that account will show up on your credit report immediately. If it’s older and more established, even better. Just make sure the person has a good history with that account, because bad credit history shows up just like good history does.

Are You Looking for a Golf Course Home for Sale in Orlando?

We can help you find your dream home on a golf course in the Orlando area. Call us at 407-529-4621 or get in touch with us online to talk about what you need – we’ll make it happen!

While you’re here, check out our:

Our goal at ABR Orlando is always to provide you with valuable information that can help you make better decision about your life choices and when we find a great resource, to present the information and introduce the firm or individual to you. We have a number of “White Papers” that you are free to request, please contact us at dave.hoyle@abr-orlando.com to receive a copy; or contact Michael Eastham directly at michael@Fellowshipia.com.

CEO

Michael Eastham, CPA, PFS, is the founding principal of Fellowship Financial Group in Altamonte Springs, Florida. Mr. Eastham has been involved in financial services for over twenty five years. He is an active member of the American Institute of CPA’s and has earned their Personal Financial Specialist (PFS) designation. He has a BBA in Accounting from James Madison University, holds a Series 65 & 63 securities licenses as well as licenses in Insurance and Annuities.

Mr. Eastham served as Chairman of the Leadership Seminole Board of Directors and Treasurer of the Seminole County Regional Chamber of Commerce Board of Directors. He teaches Adult Education courses and Continuing Education for CPAs, Financial Planners, Insurance Professionals, Attorneys and the Florida Association of Real-tors. Mr. Eastham is a published author and is a recognized expert in the areas of financial strategies, retirement planning and asset protection. He also hosted the financial radio show, ‘Your Home, Your Money’ for over 8 years.

Michael Eastham

Fellowship Financial Group
393 Center Pointe Circle #1461
Altamonte Springs, FL 32701
Phone: 407.949.5888
Fax: 407.388.1056

michael@fellowshipia.com

White Paper – Understanding Required Minimum Distributions

Posted on September 4, 2017 by Fellowship Financial Group

VA Loans: What You Need to Know if You’re Buying a Golf Course Home in Orlando

If you’re a veteran searching for a golf course home for sale in Orlando or any of the surrounding communities (including Longwood, College Park, Winter Park and Windermere), you’re likely eligible for a VA loan – but there are a lot of things people don’t know about VA loan benefits.

Here’s the inside scoop.

What is a VA Loan?

A VA loan is a loan that you get through a lender that the Veterans Administration backs. That means your lender can give you better terms and interest rates because the VA guarantees a portion of it – the lender won’t lose out if you default on your payments.

Even if you have a difficult time getting other types of financing, this VA program can help you purchase a single-family home, a condo or a manufactured home, or to build a home. You can even use your benefit to buy and “fix up” a house or make a house more energy-efficient.

Who’s Eligible for VA Loans?

If you’re a veteran of the U.S. Armed Forces or a current service member, or you’re a qualified dependent of a veteran or current service member, you could be eligible for a VA loan. You must have been honorably discharged from the service. (Learn more about VA loan eligibility here.)

VA Loan Benefits for Orlando Homebuyers

VA loans have several benefits, including:

No down payment. As long as the home’s sale price doesn’t exceed its appraised value, you don’t have to put any money down to buy a home with a VA loan.
No private mortgage insurance premium requirements. Most homebuyers who have less than 20 percent of a home’s sale price as a down payment must buy private mortgage insurance, or PMI, until they’ve paid down at least 20 percent of the home’s value. That’s not the case with a VA loan – there’s no PMI requirement.
Closing costs are limited. The VA limits the amount of money you can be charged for closing costs when you purchase with this type of financing. Even better, sellers are allowed to pay your closing costs, which can help you get into a home with very little money up-front.
Lenders can’t charge you early repayment penalties. With many types of home financing, lenders are allowed to charge borrowers early repayment penalties (that’s so they can make up the money they’re losing in interest payments). If you use a VA loan, though, lenders are forbidden to charge you early repayment penalties; you can make extra mortgage payments and pay off your loan faster without any repercussions if you want to.
Help if you can’t make payments. If you’re unable to make your mortgage payments, you can go to the VA and ask for help. There’s no guarantee that they will help you, but there are programs in place to do just that.

VA Loan FAQ

What’s the maximum debt-to-income ratio on a VA loan?

There’s no maximum debt-to-income ratio, or DTI, on a VA loan. Most lenders look for a DTI that’s lower than 36 percent, but the VA does not put a limit on it – and if your lender wants to approve you but your DTI is over 41 percent, the lender must provide the VA with compensating factors.

What is the maximum VA loan amount?

There’s no maximum VA loan amount, but the VA does limit the amount it will guarantee. The current limit is $417,000 in most parts of the country, but you can double-check here.

What’s the minimum credit score requirement for VA loans?

The VA doesn’t require a minimum credit score, but your lender might. However, even if your lender does have a minimum credit score requirement, the lender must still look at your entire loan profile before making a lending decision. That means many veterans who wouldn’t otherwise be eligible for financing can still get it with the VA’s help.

Can you only get one VA loan?

You can only get one VA loan at a time – but during your lifetime, you can get as many as you’d like to as long as the last VA loan you got is paid off. The benefit never expires, so even if you served many years ago and meet the requirements for this type of loan, you can use it.

Are You Buying a Golf Home in Orlando?

We can help you find your dream home on a golf course in the Orlando area. Call us at 407-529-4621 or get in touch with us online to talk about what you need – we’ll make it happen!

While you’re here, check out our:

Interest Rate vs. APR: What You Need to Know Before You Buy a Home in Orlando