Mortgages for Seniors – Enjoying Your Golden Years

mortgages for seniors

There are various reasons seniors choose to get mortgages, from upsizing or downsizing to tapping into the equity they’ve built in their homes. While getting a mortgage after a particular age might seem challenging, as long as you meet the required eligibility criteria, there is no reason why you cannot qualify. Besides, given the different types of mortgages for seniors, qualifying for one might be simpler than you think.

Senior Homeownership and Mortgages in Numbers

Data released by the Federal Reserve Bank of St. Louis shows that there is a slight increase in homeownership rates from the 55-year to 64-year-old bracket to those aged 65 years or more. For example, 75% of 55-year to 64-year-olds in the country owned homes in 2020, when compared with 80% for those aged 65 years or older. In 2022, the numbers stood at 76% and 77% respectively.

Data compiled by Nation Swell highlights that the percentage of people aged 65 years or more who have mortgages has increased by 28.5% from 2000 to 2022. In addition, while mortgage debt is not common in this age bracket, 34% of people aged 65 years or more had mortgages in 2022.

A more recent post in the New York Times suggests that 40% of homeowners who are 64 years or older had mortgages in 2022.

Why Seniors Get Mortgages

While some people choose to get mortgages a few years before retiring, there are others who opt to take this path after retirement. In both cases, the reasons are varied.

  • Moving to a new home. Oftentimes, seniors wish to move out of their existing homes. Some do it to downsize, either because of financial reasons or because their homes, without their children, are too large for their needs. Instances of seniors buying new homes to be closer to their kids and grandkids are also common.
  • Reinvesting equity. Some older homeowners who have paid off their mortgages or have substantial equity in their homes might want to reinvest it to generate more income. However, in such a scenario, there is no guarantee that your investment will keep pace with your home’s growing value, so it’s best to consult a financial advisor in advance.
  • Getting a lower rate. Refinancing can be a viable option for seniors who have not paid off their mortgages yet if they benefit from a lower interest rate. Lower rates that translate into lower monthly payments can be beneficial if you need extra money or are having trouble keeping up with your payments. However, you need to account for all the fees involved in the process to determine if you will come out on top.
  • Dealing with financial problems. Given that many older people live on fixed incomes, keeping pace with inflation can seem daunting. It is not uncommon for seniors who find it hard to maintain their existing lifestyles to tap into the equity they’ve built in their homes so they may get access to the required funds. In this case, a reverse mortgage might be the order of the day.

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The Equal Credit Opportunity Act Makes Age a Non-Factor

From the legal perspective, the Equal Credit Opportunity Act makes it illegal for a creditor to discriminate against an applicant based on age as well as national origin, religion, race, color, sex, or marital status. While you might need to provide some of these details as part of your application, the only purpose they serve is that of demographic data.

Whether you are close to retiring or have already retired, you may expect your application to go through the same underwriting guidelines. What’s important is that you should demonstrate your capacity to repay the money you wish to borrow, either in the form of income or assets. So, the answer to, “Can I get a 30-year mortgage at age 65?” is in the affirmative, provided you check all the boxes.

While the law stipulates that mortgage providers cannot use age as a qualifying factor when they access applications for credit, the fact remains that you still need to meet all the eligibility criteria of the type of mortgage you wish to get.

Is It Hard for Seniors to Get a Mortgage?

If you’re wondering “What is the oldest age you can get a mortgage?” know that you may apply for one even if you are in your 90s, as long as if you meet the requirements. However, while the law prohibits lending discrimination based on age, different findings indicate that some seniors might face challenges in qualifying for mortgages.

A study carried out by the Center for Retirement Research at Boston College points out that there is a direct correlation between rejection and age, one that does not work in favor of older applicants. However, it mentions this does not imply that lenders are in violation of the fair lending legislation.

Results of the study highlight that the law makes way for lenders to consider applicants’ ages in some circumstances. In addition, it takes into account the economic implications that lenders face because of mortality risk owing to which there might be a need for additional collateral.

A working paper by the Federal Reserve Bank of Philadelphia has also found a link between the age of borrowers and application rejection rates. It points out that the probability of rejection increases gradually with age, but accelerates during old age. One contributing factor can be the lack of ability to maintain properties.

Other factors that can play important roles in the outcome of your application include your existing debt and assets. For example, if you already have significant debt, a lender might feel that you may not be able to handle more debt, especially if you’re on a fixed income. 

Types of mortgages for seniorsWhich Type of Mortgage Is Typically Offered to Seniors?

There is no single type of mortgage that lenders provide to seniors, and the options you get are largely the same as the ones that younger borrowers get. If anything, a few alternatives enter the picture only as you grow older. The most common types of mortgages for seniors include conventional loans, VA loans, and reverse mortgages.

Conventional Loan

A conventional or conforming loan is one that meets the guidelines set by Fannie Mae and Freddie Mac. Depending on the lender you select, you might be able to make a down payment as low as 3%. You typically need a credit score of 620 or higher to qualify.

VA Loan

The U.S. Department of Veterans Affairs (VA) backs these no-down payment mortgages for eligible existing and retired military personnel. If you qualify, you may use to proceeds to buy a new home or refinance an existing mortgage. While there is no minimum credit score requirement, the possibility of approval increases with a score of 620 or higher.

Reverse Mortgage

If you have built adequate equity in your home and are at least 62 years old, you may qualify for a reverse mortgage. The biggest advantage of this type of mortgage for seniors is that you don’t have to make any monthly payments. Instead, you receive money from the lender. In addition, there is no income-based eligibility criterion.

USDA Loan

The U.S. Department of Agriculture (USDA) guarantees USDA loans, and you may qualify for one as a low- to moderate-income borrower. The property you wish to purchase does not have to be rural. It can be in an eligible suburban area of a large city or a town with a population of up to 25,000. A credit score of at least 640 will hold your application in good stead.

FHA Loans

Backed by the Federal Housing Administration (FHA), FHA loans might work well for seniors with less-than-perfect credit scores. If your credit score is 580 or higher, you may make a 3.5% down payment. With a credit score of 500 to 579, the minimum down payment increases to 10%.

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Non-Conventional Types of Mortgages for Seniors

Given that there is no particular type of mortgage that qualifies as the best mortgage for seniors, it makes sense to explore all possible options. Then, you may make a decision based on your specific situation. Moving beyond the traditional types of mortgages for seniors, here are the ones that not all lenders provide.

Bank Statement Loan

You may consider looking at what a bank statement loan has to offer if your income comes from non-traditional sources like Social Security, a retirement account, or rent. In this case, you may expect lenders to take your cash flow, savings, and assets into account, and you won’t need to present paystubs or W-2s. However, higher interest rates are typically part of the parcel. The minimum down payment may vary from 10% to 20%.

Asset Depletion Loan

An asset depletion loan lets high-net-worth individuals borrow money using the value of their existing assets like stocks and bonds as collateral. This loan allows you to keep ownership of the asset while accessing part of its cash value. In this case, you may apply for a mortgage and ask the lender to convert your assets into qualifying monthly income.

Cash-Out Refinance

The difference between a cash-out refinance and conventional refinancing is that the former replaces your existing mortgage with a larger loan, and you get the difference in cash. While you need significant equity in your home to qualify, Social Security income can also count as income if you’re applying for cash-out refinance.

Best mortgage for seniorsIncome-Based Documents You Need to Apply

Practically every type of mortgage for seniors requires that you provide documents to verify your income. The documents you need to submit depend on the type of income you earn.

  • Social Security. You’ll need a recent receipt of income and a copy of your Social Security award letter. If you receive Social Security survivor benefits, you’ll need to show that you will continue receiving the income for three years or more.
  • Supplemental Social Security Income (SSI). You need to provide a recent receipt of income and a copy of your Social Security award letter.
  • Income from government, retirement, or pension. You need to provide an IRS W-2 or 1099 form, federal tax returns, bank statements showing the deposited income, a copy of the benefit statement/retirement award letter, and a statement from the income provider.
  • Income from IRA, 401(k), or Keogh plans. In addition to the documents required for income from the government, retirement, or pension, you need to confirm that you will keep receiving the income for at least three more years. In addition, all the accounts in question should come with unrestricted penalty-free access.
  • Income from interest and dividends. You need to submit copies of account statements along with copies of tax returns for the preceding two years.
  • Income from VA benefits. You’ll need to verify that the income will stay in place for at least three more years and submit a letter from VA that confirms the income. This does not apply to VA’s retirement and long-term disability income.
  • Income from long-term disability. You need to submit the income’s proof of eligibility and documents that outline the amount and payment frequency. You also need to verify that the income does not have a predetermined end date.

Conclusion

You can get a mortgage as someone who is retiring in a few years or has already retired if you meet the required eligibility criteria. More often than not, this requires having an acceptable credit score and enough income/assets.

Mortgages for seniors offer competitive interest rates and flexibility in terms. For example, you may get a conventional mortgage that allows you to make bi-weekly repayments or one that does not charge a prepayment penalty.

If you’re having trouble choosing from the different types of mortgages for seniors, consider discussing your situation with a reputable mortgage provider. Once you have all the information you need, you may make a suitable decision.

What is Better, a Fixed- or Adjustable-Rate Mortgage?

What is better, a fixed or adjustable rate mortgage?

Becoming a homeowner is an incredible milestone that should be celebrated! Once you have decided that you are ready for this next step, it is important to prepare for the critical decisions you will need to make that determine your financing. You will be faced with the question of what type of mortgage is best for you: fixed- or adjustable rate? In this blog, we’re breaking down the key difference between these options to allow you to decide with confidence!

 

What Is a Fixed-Rate Mortgage?

For a fixed-rate mortgage, the interest rate remains the same throughout the entire term of the loan. This ensures that there is no change in your monthly principal and interest portion of the payments. Real Estate taxes and Insurance premiums typically increase over time. Fixed-rate mortgages provide a sense of security and allow for simplified long-term budgeting.

One of the key benefits of a fixed-rate mortgage is that it safeguards borrowers from interest rate hikes that can cause monthly payments to increase. Besides, understanding how fixed-rate mortgages function is easier when compared to adjustable-rate mortgages (ARMs).

One possible drawback of fixed-rate mortgages kicks in when interest rates are high. In addition, since the interest rate on the mortgage remains the same, you will not benefit from any cuts. You always have the option to refinance down the road if interest rates drop, but keep in mind that you will face closing costs. After refinancing, you have a new loan.

The total interest you end up paying throughout the course of the loan depends on its term. The most common loan terms include 10, 20, and 30 years. If you’re looking to pay off your mortgage aggressively, a 10-year term is best for you. However, the monthly payments will be much higher than if you choose a 30-year term. The longer the term, the more you will pay in interest. You can make additional principal payments during the term of the loan to shorten the total term and interest paid.

 

What Is an Adjustable-Rate Mortgage?

As the name implies, the interest rate on an adjustable-rate mortgage is subject to change based on the market. Lenders rely on two basic numbers to determine which way they need to adjust their interest rates. These include the index rate and the margin.

  • Index rate. The index rate is a benchmark that has a direct bearing on your ARM’s interest rate. Some of the factors that affect the index rate include treasury yields, the Cost of Funds Index (COFI), the Secured Overnight Financing Rate (SOFR), and the prime rate.
  • Margin. The margin is the mark-up that a lender adds to the index rate and it accounts for the risk the lender is willing to take to grant you a loan.

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Why Index Rates Change

Index rates can change based on different economic factors including but not limited to:

  • Inflation. If inflation increases, the Federal Reserve may hike interest rates to cool down the economy. This can cause index rates to rise, and consequently, your ARM rate to go up.
  • Demand. When there’s a high demand for mortgages, lenders may raise index rates to manage risk.
  • Global market conditions. Global economic events can have a negative impact on index rates.

 

How ARMs Work

The interest rate attached to an ARM is typically lower than that of a comparable fixed-rate mortgage during the initial period which may vary from one to ten years. Once this predetermined period ends, the interest rate can go up or down depending on market conditions. In the long run, the interest rate of an ARM can surpass that of a comparable fixed-rate mortgage.

Once the initial period ends, your ARM’s rate begins adjusting at regular intervals. Here are the most common types of ARMs based on the frequency of adjustments.

  • 1/1 ARM. Not commonly found, the interest rate of this ARM remains the same for the first year and changes every year thereafter.
  • 3/1 ARM. There is no change in the interest rate during the first year, after which is it is subject to change every year.
  • 3/6 ARM. Interest rate adjustments take place every six months after the three-year fixed rate period.
  • 5/1 ARM. The interest rate remains fixed for the first five years and adjusts annually thereafter.
  • 5/6 ARM. Adjustments happen every six months after the initial five-year fixed period.
  • 7/1 ARM.A fixed rate applies for the first seven years, followed by yearly adjustments.
  • 7/6 ARM. You get a fixed rate for the first seven years, followed by adjustments that occur every six months.
  • 10/1 ARM. A 10/1 ARM comes with a 10-year fixed-rate period before annual adjustments begin.
  • 10/6 ARM. Adjustments take place every six months after the initial 10-year period.

adjustable vs. fixed-rate mortgagesCaps on ARMs

You may think of caps on ARMs like safety nets, limiting how much the interest rate and your monthly payments can fluctuate throughout the loan’s term.

  • Initial adjustment cap. This limits the increase in interest rate during the first adjustment period. For example, if your ARM has a 5% initial adjustment cap, your interest rate can’t jump more than 5% from the initial fixed rate at the first adjustment.
  • Periodic adjustment cap. This restricts any increase or decrease during each adjustment period after the initial fixed rate ends. Typically denoted as a percentage, it applies to each adjustment period throughout the loan.
  • Lifetime cap. The lifetime cap determines the maximum and minimum interest rate you’ll pay over the entire life of the loan, ensuring your rate won’t skyrocket even if market rates climb significantly.

ARMs with lower initial and periodic adjustment caps tend to come with higher initial interest rates because lenders take on less risk by limiting how much they can adjust the rate. On the other hand, ARMs with higher caps offer more flexibility for the interest rate to adjust with the market. However, this can lead to potentially higher monthly payments down the line.

If you’re thinking about getting an ARM, it’s crucial to understand the specific caps that apply to your mortgage, and you may benefit by asking your lender these questions.

  • What are the initial, periodic, and lifetime adjustment caps?
  • How do the caps affect the initial interest rate?
  • How would the caps limit rate adjustments over time?

 

Fixed-Rate vs. Adjustable-Rate Mortgages: The Similarities

A close look at the ARM vs. fixed-rate mortgage comparison shows you that both come with some similarities.

  • Loan term. Whether you opt for an adjustable- or a fixed-rate mortgage, you get to choose from different loan terms, typically ranging from 15 to 30 years. A shorter term means a higher monthly payment and faster payoff, while a longer term offers lower payments and extends the interest-paying period.
  • Eligibility. Getting approved for either loan usually requires a good credit score and a sound financial situation. Bear in mind that lenders assess your income, debt-to-income ratio, and overall financial stability to determine your eligibility and interest rate.
  • Ability to refinance. The option to refinance your mortgage exists no matter which of the two you select. This can be particularly beneficial if you wish to refinance an ARM before its interest rate resets.

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Adjustable- vs. Fixed-Rate Mortgages: The Differences

The key difference that stands out in the adjustable- vs. fixed-rate mortgage comparison is what happens to the interest rate through the course of the loan’s term. While it remains the same for as long as you have a fixed-rate mortgage, it becomes subject to periodic adjustments with an ARM after the initial fixed-rate period ends. Looking at the pros and cons of each type sheds more light on their differences.

 

Adjustable-Rate Mortgage: Pros and Cons

It is common for potential borrowers to ask “What is the main advantage of an adjustable-rate mortgage?” Here are the benefits on offer.

  • Lower interest rate during the initial period when compared to a fixed-rate mortgage.
  • Favorable market conditions may lead to lower interest rates down the line.
  • Lower initial payments can make qualifying for a loan easier.

What is the big disadvantage of an adjustable-rate mortgage? One potential drawback is that your interest rate and monthly payments might go up significantly over time owing to rate adjustments. Besides, since your regular principal and interest payments may change frequently, it might be challenging to create a budget for the long term.

 

Fixed-Rate Mortgage: Pros and Cons

Factors that work in the favor of fixed-rate mortgages include:

  • The interest rate will not increase with time.
  • Planning and budgeting are easier because your monthly payments remain the same.
  • You might be able to make a smaller down payment when compared to an adjustable-rate mortgage.

The benefits notwithstanding, understanding the potential shortcomings of fixed-rate mortgages is also important. For instance, you’ll need to refinance your mortgage to take advantage of falling interest rates. In addition, you might end up paying a tidy sum as interest if you get a fixed-rate mortgage when interest rates are high.

fixed rate vs adjustable rate mortgageWhich Should You Get?

While looking at the adjustable- vs. fixed-mortgage comparison is important, you need to understand that this aspect comes into play based on the type of mortgage you wish to get and the lender you select. For example, with mortgages offered under the U.S. Department of Agriculture’s Single Family Housing Guaranteed Loan Program (SFHGLP), you don’t get the option of ARMs. However, the option exists with conforming loans, as well as VA loans.

 

Why Fixed-Rate Mortgages Are Better?

While not always the case, getting a fixed-rate mortgage can work better than an ARM in different scenarios.

  • Buying for the long-term. If you plan to live in the home you purchase over the long term, a fixed-rate mortgage can bring with it a sense of budgetary stability. You can still make additional payments to repay your loan ahead of time.
  • On a tight budget. If you’re on a tight budget, any increase in interest rates can affect your ability to make higher monthly payments, making a fixed-rate mortgage a safer bet.
  • Favorable market conditions. When prevailing home loan interest rates are low, you may look forward to long-term savings by locking in a low rate. This can be the case even if the rate you pay is higher than the rate of a comparable ARM at that point because the latter can increase with time.

 

When Can Adjustable-Rate Mortgages Be Better?

Given that an ARM starts out with a lower interest rate than a fixed-rate mortgage, you get some leeway in making additional payments to bring down the principal amount early on. You may benefit by getting an ARM in a few other scenarios too.

  • Not buying a long-term home. If you plan to move out of the home you purchase before the introductory fixed-rate period ends, an ARM can save you money. This is because you can enjoy a lower rate while you’re there, and if you move before it adjusts, you haven’t locked yourself into a potentially unfavorable rate for a prolonged period.
  • Fall in interest rates. If interest rates are currently high and expected to fall, an ARM can be a gamble that pays off. As rates drop, so will your ARM’s interest rate, potentially saving you thousands over the life of the loan. However, remember, that ARMs are akin to double-edged swords; if interest rates rise, so will your payments.
  • Flipping. If you’re buying a house with the intention of fixing and flipping it soon, the money you save from an ARM’s lower initial rate can leave with you extra funds to carry out the required repairs and renovations.
  • Increase in income. If you foresee your income to increase noticeably in the times to come, you might be able to withstand the risk that comes with an ARM. This is because you will be able to make higher monthly payments, should the need arise.

 

Conclusion

Now that you know how to determine if a fixed- or adjustable-rate mortgage is better for you, take time to look at the types of mortgages for which you might qualify. For example, if you or your spouse is serving or has served in the U.S. military, you might be eligible to get a VA loan without making any down payment. If you’re still unsure about which way to proceed, discussing your specific situation and requirements with a reputed mortgage provider can help you make your decision.

FHA Vs. Conventional Loans: An In-Depth Comparison

fha vs conventional loan

FHA and conventional loans are among the two most common alternatives homebuyers turn to when they seek funding to move forward with their purchases. While you may use either one to purchase a new home, you may also use them to refinance an existing mortgage. Looking at the conventional vs. FHA loan comparison closely before determining which one might work better for you is important because each loan comes with notable differences.

What Is an FHA Loan?

Backed by the Federal Housing Administration (FHA), FHA-approved private lenders across the U.S. provide FHA loans. The FHA insures mortgages to safeguard the interest of lenders in case borrowers default on their loans. FHA insures mortgages on single-family homes and multifamily properties alike. However, the home you purchase will need to serve as your primary residence.

People with less-than-perfect creditworthiness who feel they might not qualify for conventional mortgages might benefit by looking at what FHA loans have to offer because they come with less stringent credit score requirements.

What is a Conventional Loan?

Most conventional loans meet the requirements prescribed by Freddie Mac or Fannie Mae, and you may also refer to the ones that do as conforming loans. However, they do not come with any type of government-backed guarantee. Unlike FHA loans that you may use to buy only primary residences, you may use the proceeds from a conventional loan to purchase a second home or an investment property.

Conventional loans that do not meet Freddie Mac and Fannie Mae guidelines surrounding aspects such as maximum loan amounts, applicants’ incomes, down payment requirements, and credit standards fall under the non-conforming loans bracket. Jumbo loans classify as non-conforming loans. Non-conforming loans tend to have a smaller market and come with higher-than-usual interest rates.

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Eligibility Requirements

Whether you qualify for an FHA loan, a conventional loan, or both depends on multiple factors such as your credit score and the down payment amount. However, FHA loans have more relaxed eligibility criteria surrounding acceptable credit scores and debt-to-income ratios, which is why they come first in this section of the FHA vs. conventional mortgage comparison.

FHA Loan Requirements

  • You need a minimum credit score of 500.
  • Down payment can be as low as 3% based on your credit score.
  • The home must pass a professional home inspection.
  • An FHA-approved appraiser needs to appraise the home.

Conventional Loan Requirements

  • You need a minimum credit score of 620, although you get better terms with a higher score.
  • Down payment for first-time homebuyers can be as low as 3%.
  • Down payment for a second home needs to be at least 10%.

Limits on Loan Amounts

FHA and conventional loans have maximum limits surrounding how much money you might be able to borrow, and these limits vary by county. In addition, these limits are subject to change each year.

According to the Federal Housing Finance Agency (FHFA), the conforming loan limits (CLLs) across most parts of the U.S. for one-unit properties in 2024 is $766,550, and it is $981,500 for two-unit properties.

Similarly, FHA’s countrywide floor and ceiling forward mortgage limits for one-unit properties in 2024 stand at $ 498,257 and $ 1,149,825, respectively.

fha vs conventionalDebt-to-Income Ratio Requirements

Your debt-to-income (DTI) ratio gives lenders an indication of how much money you need to use from your monthly income to make repayments toward your existing debt. Calculating your DTI ratio requires that you divide your total monthly debt payments by your monthly income and multiply it by 100. For example, if your monthly debt payments amount to $1,500 and your monthly income is $4,000, your DTI ratio is 37.5% (1500/4000*100).

The conventional loan vs. FHA loan comparison tilts in favor of the latter when it comes to acceptable DTI ratios. For FHA loans, your DTI ratio should be 50% or lower. When it comes to conventional loans, most lenders look at DTI ratios of 36% or lower with favor.

It’s important to note that the maximum allowed DTI ratio does not apply to each applicant. Lenders might view borrowers with the higher end of acceptable DTI ratios with favor if they appear to be strong borrowers through compensating factors such as excellent creditworthiness or access to adequate cash reserves.

Down Payment Requirements

Just how much down payment you need to make when buying a home varies based not just on the type of loan you choose, but other factors as well. While common perception suggests that you need at least a 20% down payment to get a conventional loan, this is far from the fact.

For instance, the Conventional 97 Loan is a 3% down payment loan alternative for first-time homebuyers, as well as for homeowners who wish to refinance their Fannie Mae loans, and you don’t have to fall in the low-income bracket to qualify.

The minimum down payment you need to provide to get an FHA loan depends on your credit score. You need to provide at a least 10% down payment if your credit score is between 570 and 579. If it’s 580 or higher, you may pay as little as 3.5%.

From the down payment requirement, the Conventional 97 vs. FHA loan comparison tilts slightly in favor of the former because you can make a lower down payment.

You may consider making a large down payment, even more than 20%, if you feel to can afford to because it comes with multiple benefits. With conventional loans, it takes away the need to pay extra for private mortgage insurance (PMI). In both cases, you may look forward to paying lower monthly payments and interest charges throughout the course of the loan term. You’ll also get to build equity in your home faster.

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Mortgage Insurance Requirements

Mortgage insurance helps safeguard a lender in case you default on your loan. If you plan to get a conventional mortgage and pay less than 20% of a home’s selling price as down payment, you will need to get PMI. Once you build 22% equity in the home, you no longer need to make PMI payments.

With FHA loans, while FHA insures your mortgage, you still need to pay mortgage insurance premium (MIP). You need to keep making these payments until you pay off your loan in full.

Since you need to make mortgage insurance payments toward an FHA loan for the life of the loan, PMI might be more cost-effective in the long run, especially if you have good or excellent creditworthiness. This is because your credit score plays a role in the PMI rate you get.

Property Standard Requirements

The condition of the home you wish to buy plays an important role in the FHA vs. conventional loans comparison. This is because FHA appraisals follow more stringent guidelines than conventional appraisals. While assessing the value of a home is part of an FHA appraisal, you may also expect an FHA appraiser to pay due attention to aspects such as adherence to local codes, quality of construction, and overall safety of the property.

FHA does not require the fixing of problems that do not affect the soundness or safety of a home. If you feel the home you wish to purchase might not pass an FHA appraisal, you may get the seller to make the required repairs beforehand. Alternatively, you may think about applying for a conventional loan that has more relaxed norms surrounding property standards.

Bear in mind that from the point of view of an FHA appraisal vs. a conventional appraisal, while the former focuses more on a property’s safety and security, the latter’s focus rests more on a property’s condition and value.

Is a Conventional Loan Better Than an FHA Loan?

If you’re wondering whether a conventional loan is better than an FHA loan, know that both come with their share of advantages and disadvantages. For example, while you may qualify for an FHA loan with less-than-perfect creditworthiness, you’ll need to keep making MIP payments until you pay off the loan completely.

conventional loan vs fhaThe Pros and Cons of FHA Loans

The main advantages of getting an FHA loan include:

  • Down payments can be as low as 3.5%
  • Low closing costs
  • Lower minimum credit scores required when compared to conventional loans
  • Higher DTI ratios accepted when compared to conventional loans

The possible drawbacks of getting an FHA loan come in the form of:

  • Need to pay mortgage insurance premium through the course of the loan’s term
  • More stringent property standard requirements than conventional loans
  • Need to use the home you buy as your primary residence
  • Interest rates might be higher than conventional loans owing to less stringent eligibility requirements

The Pros and Cons of Conventional Loans

You might benefit by getting a conventional loan in different ways.

  • Flexibility in terms
  • Nonconforming loans come with no maximum limits
  • No need to get PMI if your down payment is 20% or more of the home’s selling price
  • Can use the proceeds of the loan to buy a second or an investment home

Like FHA loans, conventional loans also have some shortcomings.

  • Typically stricter eligibility requirements than FHA loans
  • Need a higher credit score to qualify when compared to FHA loans
  • Need a lower DTI ratio to qualify
  • Need to pay extra for PMI if your down payment is below the 20% mark

Tips to Reduce Your FHA or Conventional Loan Expenses

One common factor in the FHA loan vs. conventional loan comparison is that you get the ability to lower your loan expenses in both cases.

Compare Loans Estimates

It is important that you compare loan estimates provided by different lenders. Doing this requires paying attention to interest rates, monthly principal and interest payments, monthly mortgage insurance payments, total monthly costs, upfront loan costs, lender credits, as well as the amount of money you need to cover closing costs.

Select a Suitable Loan Term

Selecting a loan term has a bearing on the immediate and long-term cost of your mortgage. For instance, a longer loan term would result in lower monthly payments, and the converse holds true as well.  However, the longer the loan term, the more you would end up paying as interest.

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Make a Large Down Payment

Making a down payment of 20% or more can help you avoid the added cost of private mortgage insurance if you get a conventional loan. In addition, a large down payment – toward an FHA or conventional loan – would result in lower upfront fees, overall interest, and monthly payments. You might even benefit by getting a better interest rate.

Reduce Closing Costs

Closing costs refer to the expenses that buyers and sellers incur when transferring a property’s ownership. These may include loan origination fees, appraisal fees, title insurance charges, property taxes, escrow deposits, mortgage tax, and underwriting fees.

These costs tend to vary from one county to the next, and typically range from 3% to 6% of the loan amount. What helps is you may take measures to lower your closing costs by paying attention to all the fees you need to pay.

The first thing you may do to bring down your closing costs is to get the seller to contribute partially. The possibility of this happening is more likely if you’re buying in a market that’s not favorable for sellers. Another option is to negotiate with your lender, especially if you’ve compared multiple loan estimates and have found lower costs through other lenders.

You may also benefit through lower rates and fees if you’ve been a longstanding customer of the financial institution through which you’re seeking a mortgage.

If you’re unable to fund closing costs on your own, you might ask your mortgage provider to include the same in the loan amount. If your lender agrees, these costs get added to the principal amount, which you repay over time.

Conclusion

Which is better, an FHA or a conventional loan? You may consider applying for the former if you have less-than-perfect creditworthiness or if you don’t have enough money to make a large down payment. This is also the case if you’re looking at buying a primary residence or if you have a high debt-to-income ratio.

While conventional loans tend to come with stricter eligibility requirements, they may lead to savings in the form of low or no mortgage insurance payments. A conventional loan might also work well for you if you wish to buy a home that will not pass an FHA appraisal, if you’re buying a second home, or if you’re in it for the long haul.

If you’re still unsure about where the FHA vs. conventional loan comparison stands based on your situation, you may consider speaking with a reputed mortgage provider who can take the specifics of your case into account and then guide you in making a more well-informed decision.

A Guide to Buying a Second Home or an Investment Property

Buying a Second Home

Buying a second home is an exciting investment. Whether you’re looking to generate income or have a home at a destination you love to visit, the path you take will depend on your existing financial circumstances. We’ve created an in-depth guide on second home purchases to help you decide if it is right for you.

Difference Between a Second Home and an Investment Property

While a second home is a true investment in the financial world, when it comes to getting a mortgage and filing taxes, a second home and an investment property are not the same. For example, for a home to count as a second home, you need to visit it for a minimum number of days every year. There is no such occupancy requirement with an investment property.

What Is the Advantage of Owning a Second Home?

The advantage of owning a second home depends on the reason why someone might want to buy one in the first place. After all, while you might look upon it as a sound long-term financial strategy, someone else might opt to buy a second home as a lifestyle option. Here are some of the most common reasons to buy a second home.

Investment

Investing in real estate is one of the most lucrative opportunities you can leverage. Historically, home values continue to rise year after year. By investing in a second home, it’s most likely that you will see a return when it comes time to sell the property.

Consider these numbers shared by Trading Economics. In March 1968, the median home sales price in the U.S. was a little below $200,000. In March 2024, this number stood at around $394,000, which was a 4.8% year-on-year increase when compared to March 2023.

So, is buying a second house a good investment? Well, it can be, provided you approach the process with caution and have a clear picture of all potential costs. Besides, long-term investment in real estate can deliver better returns than most other asset classes.

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Vacationing

According to a survey carried out by GOBankingRates, 40% of Americans who partook owned vacation homes. In addition, a large percentage spent less than $200,000, whereas only a small fraction spent $500,000 or more. People who buy second homes for vacationing typically like getting away from the hustle-bustle of their everyday lives once in a while and getting close to nature, be it the mountains, a lake, or a beachfront.

Rental Income

There are two ways to approach renting. If you buy it in a neighborhood that allows short-term rentals, you may rent it out on platforms like Airbnb and VRBO. Alternatively, you may rent it long-term, but in this case, it would become an investment property. In both cases, the rental income can help in paying down your mortgage.

Retirement

Buying a second home before you retire can be beneficial in different ways. For example, you get to spread the cost over a prolonged period and also get to use the second home before retirement. Besides, you may choose to rent your primary or second home depending on which one you use at any point in time.

Tax Benefits

If you purchase a second home for personal use and don’t plan to rent it out, you may deduct the interest you pay toward a mortgage in state and local taxes. However, these depend on the deductions you’re already using toward your first home, and you should contact your financial advisor or accountant for tax advice.

Is buying a second house a good investment?Factors You Need to Consider

All the benefits of purchasing a second home sound wonderful, but there are other important factors to consider.

Financial Implications

If you haven’t paid off your first home’s mortgage completely and plan to get a mortgage for a second home, you’ll need to make two mortgage payments every month. In addition, you’ll need to account for the maintenance costs of two properties. While you might be able to afford these expenses now, make sure you take the long-term picture into account. For example, do you have enough savings and do you need to save for your children’s education?

Financing

For anyone wondering, “Is it harder to get a loan for a second home?” know that this depends on meeting different eligibility criteria. In addition, while first-time homebuyers get to choose from different types of mortgages, second-time homebuyers don’t get as many options. If you wish to buy a second home as an investment, you may consider applying for a second home investment loan. Your other alternatives include:

  • Conforming loans. Conforming loans satisfy different terms and conditions set by Freddie Mac, Fannie Mae, and the Federal Housing Finance Agency (FHFA), including region-specific maximum loan limits. These loans tend to come with lower interest rates when compared with non-conforming loans.
  • Jumbo Loans. Jumbo loans exceed conforming loan limits, allowing you to borrow considerably large sums. However, you need a credit score of 700 or higher to qualify and make a down payment of 10% to 20%.
  • Cash-out refinancing. Cash-out refinancing involves refinancing your existing mortgage, where you get money for some of the equity you’ve built in your house. However, the amount you owe toward your primary mortgage will increase because of the cash-out refinance.
  • Home equity loan. A home equity loan does not involve refinancing your existing mortgage. Instead, you get a second loan against the equity you’ve built in your home.

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Use of Home

Do you have to put more money down on a second home? This largely depends on how you plan to use the home you purchase. For example, if you use it as an investment, you need to pay at least 20% down payment. In addition, you may expect to pay a higher interest for an investment loan.

To qualify as a second home, you must live in it for some time during the year. While you may offer it for short-term rentals, you need to keep it for your personal use for a minimum duration each year. In addition, it should be at least a predetermined distance away from your existing home. If you’re buying a home to fix and flip or rent out long-term, it will count as an investment property.

Renting

If you plan to use the rental money you get from your second home to pay off your mortgage, pay particular attention to the location you select. If you think that buying a home near a popular tourist destination that commands premium rates might work well for you, bear in mind that most such places have peak and slow seasons. Besides, you might need to forgo your desire to spend time at the home as and when you want.

With short-term renting, you also need to account for state, city, and local zoning regulations. For example, if you buy a second home in New York City, you cannot rent it out entirely for less than 30 days. When it comes to short-term rentals, the city only allows two guests and requires the presence of the primary resident the whole time. The city’s Local Law 18 also requires short-term rental hosts to register with the city.

Short-term rentals can be a concern in neighborhoods with homeowners associations as well as condominiums because many across the country are trying to limit the presence of short-term renters.

If you’re buying an investment property, you may rent it long-term.

Taxes

The Internal Revenue Service (IRS) requires that you stay in your second home for a predetermined minimum number of days each year for it to count as a place of residence. If this is the case, you may deduct the interest you pay toward your mortgage.

If you don’t rent out your second home for a given number of days per year, it counts as a second home. In this case, there’s no need to report the rental income. However, you need to do so if you rent it out for more than the prescribed number of days.

If the IRS views the home as an investment property, you may file deductions related to expenses surrounding operating and maintaining the property. If the amount you spend exceeds the rental income you earn, you may report your losses through Schedule E (Form 1040).

When you sell your second home, whether or not you qualify for capital gains exclusion depends on how much time you have spent in it and the time that has passed since its purchase.

Bear in mind that states have their own tax laws in addition to the IRS. This makes it important to seek tax advice from your financial advisor or accountant.

Ongoing Costs

How much you need to spend toward ongoing costs depends on how you plan to use your second home, and here are some expenses that remain common across the board.

  • Insurance. Homeowners insurance tends to cost more on second homes than primary residences. Besides, you might need additional insurance based on whether you plan to use your new home for short- or long-term rentals.
  • Maintenance. Maintenance costs can come in the form of major seasonal expenses as well as basic repairs. Even if you don’t reside at the property much and don’t rent it out, you’ll still need to spend some money on its upkeep. While hiring someone to manage the property in your absence is a great idea, you need to account for the costs at the onset.
  • Utilities. If you rent the home out, you may get the renter to pay for the utilities. However, if the home remains unoccupied for any duration, you’ll need to keep paying at least the minimum costs to keep the utility connections going. You might also consider investing in a home security system.
  • Travel. If you buy a vacation home, you need to account for the costs you will incur in traveling to and from the property.

Is it harder to get a loan for a second home?Second Home Mortgage Requirements

When you apply for a second mortgage, you may expect a lender to look at the same financials such as your down payment, credit score, and debt-to-income (DTI) ratio. What varies is that you have to meet higher standards when getting a mortgage for a second home. This is because lenders feel borrowers with multiple mortgages have more chances of defaulting if they face financial difficulties.

Down Payment

If you’re wondering how to buy a second home with no money, know that it might be possible if you’ve paid off your first mortgage completely and then qualify for a no-down payment mortgage like a USDA loan or a VA loan.

With your first mortgage, you might have paid no down payment at all depending on the one you got. Even with a conventional mortgage, there’s a possibility you might have paid at least 5% of the home’s buying price. However, with a second mortgage, expect to pay at least 10% as down payment, although most lenders look for 20%. The minimum you might need to pay for an investment property is between 15% and 25%.

Credit Score

A majority of lenders require borrowers who apply for second mortgages to have credit scores of at least 620, although some look for scores of 680 and higher. While a good credit score of 670 to 739 increases the likelihood of your application’s approval, a very good score of 740 or higher brings with it an even better possibility of getting the mortgage you seek. If you plan to get a second home investment loan, expect lenders to look for scores of 700 and higher.

DTI Ratio

First-time homebuyers may qualify for mortgages with DTI ratios of up to 43%, although lenders prefer it to be 36% or lower. For a second mortgage, it is important to keep your DTI ratio below 36%. If you wish to use the home as an investment property, it might be possible to include up to 75% of the expected income from rent toward your DTI.

Conclusion

Despite all the work that goes into buying a second home, it can be an exciting and fulfilling process. After all, while it can work as a great investment, it can also provide significant value to your life. Whether you plan to buy a vacation home or an investment property, consider contacting a mortgage provider that offers loans for second homes and getting preapproved. This should give you an indication of how much you may borrow and you can then look for homes accordingly.

You should also discuss your plan of buying a second home with your financial consultant or advisor to determine if it aligns with your existing finances and long-term financial goals.

A Guide to Choosing the Best Mortgage Lender

top mortgage lenders

Looking for a mortgage lender that suits your requirements can be a daunting task, given the number of alternatives from which you get to choose. After all, you would want to work with a lender that is reliable and trustworthy and provides great customer service too. While the choices on offer might seem confusing, know that finding the best mortgage lender is not difficult, provided you pay attention to a few simple aspects.

Creditworthiness Matters

The best mortgage lenders for poor credit are usually not the same as the best mortgage lenders for fair credit or good credit. This is because lenders for poor or bad credit operate in a different sphere, and they pay more importance to aspects other than an applicant’s credit score when compared to good credit underwriters. The compensating factors they look at include:

  • High income
  • Low debt-to-income (DTI) ratio
  • A down payment of 10% or more
  • Time spent with your existing employer
  • Comparable rent payments
  • Large cash reserves

Your credit score has an effect on the interest rate you may get. While a good to excellent credit score brings with it the possibility of a competitive interest rate, the reverse holds true as well. This is basically how all the top mortgage lenders operate.

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Identify Your Options

The best-rated mortgage lenders come from different realms. This is because providing home loans is no longer the domain of just banks. When it comes to selecting the best mortgage provider, your other options include:

  • Credit unions. Credit unions work as member-owned financial organizations that typically offer highly competitive interest rates. In some instances, membership is highly restrictive, so you might need to check which ones you qualify to join. Like banks, they tend to offer an array of financial products.
  • Mortgage bankers/lenders. Mortgage bankers specialize in facilitating real estate loans. They typically borrow money to provide loans from wholesale lenders, although some use their own funds as well. They tend to keep the entire underwriting process in-house, which makes for quicker processing times.
  • Mortgage brokers. Mortgage brokers do not provide loans directly. Instead, they give you access to different loan offerings from multiple lenders. While they give you more alternatives, they have little control over processing times.
  • Hard-money lenders. Hard-money lenders include individual private investors as well as groups. They use real estate to secure the short-term loans they provide. Unlike traditional lenders who focus on borrowers’ ability to repay, hard-money lenders pay more importance to the value of the property that protects their investment. These lenders tend to charge higher-than-usual loan origination fees while offering poor interest rates.
  • Non-qualified mortgage providers. People who don’t qualify for traditional mortgages may turn to non-qualified mortgage (non-QM) You may apply for a non-QM if you have less-than-perfect credit or as a foreign national. Some of the best mortgage lenders for bad credit come from this segment.

The Difference Between Retail and Wholesale Lenders

Retail lenders deal directly with borrowers. They include banks, credit unions, and mortgage bankers. Wholesale lenders provide mortgages through third parties, which could be banks, credit unions, mortgage bankers, or mortgage brokers. While they do not work directly with borrowers, they originate and fund loans. In some instances, they are responsible for servicing loans as well.

best mortgage companies
How to Choose the Best Mortgage Lender?

Narrowing down on the top mortgage lenders requires that you compare them across different parameters. These include:

  • Interest rate
  • Fees
  • Customer service
  • Flexibility in terms and conditions

Interest Rate

Whether you are looking for the best mortgage lenders for first-time buyers or refinancing, comparing interest rates provided by different lenders has the potential to lead to long-term savings.

According to Freddie Mac, getting just one additional quote may result in a saving of around $1,500 through the life of your loan. If you get five different quotes, the savings can go up to $3,000. Freddie Mac also found that around half of all people applying for home loans do not compare rates provided by different lenders.

Fees

Depending on the lender you select, the closing costs you need to pay might include different kinds of fees. This is the case even with the best mortgage companies. The fees you might need to pay include application fees, document preparation fees, assumption fees, loan origination fees, closing fees, credit report fees, mortgage broker fees, and prepayment penalties.

Customer Service

Given that getting a home loan is a long-term commitment, it is important to select a lender that focuses on providing great customer service. Going through online reviews of previous borrowers may give you valuable insight into how any lender rates on this front. You may also want to look at how you can get in touch with a lender, should the need arise. Ideally, you should be able to communicate with your lender over the phone and online.

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Flexibility in Terms and Conditions

This can come in the form of a flexible repayment schedule, where you get the ability to make weekly, biweekly, or monthly repayments. In addition, some of the best mortgage providers let you make additional payments or pay your loan off sooner than planned without charging any extra fees.

Flexibility can also come in the form of a fixed-rate option for the initial period of the loan, a repayment pause, or a redraw facility. In this regard, the top mortgage lenders are the ones who offer increased flexibility.

How to Find the Best Mortgage Lender?

Finding the best online mortgage lenders or ones that operate out of brick-and-mortar establishments requires that you follow a similar process. If you know someone who has purchased a house in the recent past, you may ask for recommendations. This might work well for you because there is a good chance that the person you ask would have done the required research. However, bear in mind that it is easy to carry out a comparison on your own.

Using the internet to look for local and national lenders is an option, and you may get quotes based on your requirements by using simple online tools. However, there is a probable downside to this process. Once you part with your personal information, you might start getting a barrage of calls from different lenders, both good and bad. You then have to scout through a considerable pile to make a shortlist of the top mortgage lenders based on your specific requirements.

Another way to find the best home mortgage lenders is to carry out a manual comparison on your own. To do this, you need to call local banks, credit unions, and mortgage bankers, and ask them what types of loans they provide. Once you let them know how much you wish to borrow and provide other basic information such as the value of the home you wish to purchase, you should be able to get the interest rates on offer.

Getting Preapproved

If you are wondering how to find the best mortgage company, consider getting a preapproval. This is because you then get valuable insight into accurate loan pricing based on factors such as your finances and creditworthiness.

What also helps is that getting preapproved puts you ahead of other potential buyers who do not have preapproval, but show interest in the same property. This is because the seller knows that a mortgage provider has analyzed your financial situation and that you can actually afford to purchase the property.

Once you get a preapproval, make sure you go through it carefully. If there is any aspect that you do not understand, seek clarification.

best mortgage lendersAsking the Right Questions

When searching for the best mortgage lenders, it is important to ask all the right questions before signing on the dotted line. Some of the questions you need to ask include:

  • What are your down payment requirements?
  • How much time do you take for preapproval, approval, and closing?
  • What closing-related fees will I need to pay?
  • What other fees will I have to pay?
  • Can you waive any fees or roll them into my mortgage?
  • Can I contact you via phone, email, or in person?
  • How much time do you typically take to respond to messages?

Once you interact with different lenders, ask yourself a few simple questions to determine which one might work best for you.

  • Was the lender quick in replying to your emails or calls?
  • Was the person you interacted with patient and friendly?
  • Did he or she provide satisfactory answers to your questions?
  • Did the lender shed light on all the particulars of a loan, including timelines and associated costs?
  • Do you think the lender was transparent and honest with you about all loan-related costs?

What Are the Best Mortgage Loans?

There is no single type of mortgage that qualifies as the best because almost each caters to different requirements, and you get to choose between two basic types. These include government-backed mortgages and conventional mortgages guaranteed by banks or private lending institutions.

Government-Backed Mortgages

Most government-backed mortgages fall into three basic categories.

  • FHA loans. The Federal Housing Administration (FHA) insures these loans. Congress created the FHA in 1934, with the main aim of making home buying for first-time buyers more affordable. If you qualify for an FHA loan, the down payment you need to make could be as low as 3.5% of the property’s purchase price.
  • USDA loans. The U.S. Department of Agriculture (USDA) backs these loans. USDA loans are typically for rural homebuyers who meet necessary income requirements. However, some areas on the outskirts of big cities also qualify.
  • VA loans. The Department of Veterans Affairs (VA) guarantees these loans. They come with highly competitive interest rates, while requiring little to no down payment. However, you may apply for a VA loan only as an existing military service member, a veteran, a spouse, or a widow/widower.

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Conventional Loans

A bank, credit union, savings institution, or private lender may back a conventional loan. To qualify for a typical conventional loan, you would need good to excellent credit history. This is because there is no external source guaranteeing your loan and the possibility of you defaulting poses a high level of risk for a lender.

Getting a conventional loan typically requires paying a higher down payment when compared to government-backed loans. In most cases, lenders look at getting at least 5% of a home’s selling price as down payment, although this might vary depending on the lender you select and your creditworthiness. A conventional loan can come in varied terms, which include 10, 15, 20, and 30 years.

HomeReady by Fannie Mae is also a conventional loan, and its down payment can be as low as 3%.

Choosing Between the Two

If you have a stable income along with good creditworthiness, and in case you cannot afford to make a large down payment, getting a government-backed loan might work well for you. If you have a low DTI ratio, or if you can lower it in the near future, and if you have the funds to put toward a large down payment, you might benefit by getting a conventional loan. This way, you get the ability to circumvent higher interest rates and added fees that might come with government-backed loans.

Bear in mind that if you plan to make a down payment of less than 20%, you will need to pay extra for getting government or private mortgage insurance. Making a down payment of less than 20% with an FHA loan requires that you pay qualified mortgage insurance premiums (MIPs).

Who Are the Best Mortgage Lenders for First-Time Buyers?

The top mortgage lenders for first-time home buyers partner with government agencies to offer down payment assistance, interest rate discounts, and access to educational resources that can guide you through the home-buying process. These loans are typically more affordable than conventional loans and are targeted at public servants, veterans, as well as people with existing student loans.

While it is common for state finance and housing agencies to market first-time homebuyer loans, they are typically serviced by banks, credit unions, and other non-bank lenders. Not all lenders offer these loans. Their eligibility criteria may vary depending on which state you live in as well as the location of the property.

Conclusion

Your individual requirements play a crucial role in determining which of the top mortgage lenders work best for you. Fortunately, once you pay attention to aspects such as credibility, interest rates, fees, customer service, and flexibility in terms and conditions, making a decision becomes a fairly simple task. Once you select a mortgage provider, try to get preapproved at the earliest as this gives you an indication of how much it is willing to lend.

The Best Neighborhoods in Long Island for Buying a Home

best neighborhoods in long island

From first-time homebuyers to people who want to move into more spacious homes, there is something for everyone in Long Island. While easy accessibility to New York City is a boon, there’s much more you’ll find in Nassau and Suffolk Counties. However, the best places to live in Long Island for young adults are not necessarily the same as the ones for families.

Given that most young adults and millennials are likely to exceed their budgets when looking for homes in New York City and its immediate surroundings, home-buying trends in the region indicate that many are turning outward.

Incidentally, Long Island, despite the infamous Long Island Expressway, has plenty to offer, of which the Long Island Rail Road (LIRR) network is only one example. The proximity to beaches and robust education systems offered by different school districts are among the other perks of living in this region. So, which are the best neighborhoods in Long Island for young adults and millennials?

Aspects that might require your attention when looking for the best Long Island neighborhoods include, but do not limit to:

  • Access to the LIRR
  • Access to public schools
  • Rating of the school district
  • Cost of living
  • Local amenities
  • Access to and quality of parks
  • Local job opportunities
  • The presence of other young families

Even if you limit your search to Nassau and Suffolk counties, you still have a significantly large area to cover. Having to choose between two cities, over 10 towns, and more than 200 villages and hamlets, arriving at a decision might seem like a daunting task. Fortunately, paying attention to your requirements can make the process considerably simpler. The list that follows gives you insight into some of the best neighborhoods in Long Island.

Greenport

The history of Greenport dates back to the mid-1600s. It went on to become a major shipbuilding and whaling village in the late 1700s. Now, its bustling harbor is home to scores of upscale yachts as well as small fishing boats. It comes as no surprise that many think of Greenport as the best place to live in Long Island.

This village in Suffolk County makes it to several lists of best neighborhoods in Long Island, and not without reason. It consistently ranks as the safest region on the island. The downtown area boasts of several restaurants and boutiques. In addition, some of the island’s best vineyards are in Greenport. Access to the Greenport Railroad Station ensures you do not have to brave the expressway traffic when heading into or out of NYC.

The Greenport Union Free School District provides public education in the region. The average home value in Greenport is around $903,000*.

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Smithtown

Ranked among the best towns to live in Long Island, Smithtown, in Suffolk County, lies along Long Island’s north shore. Located midway across the island, Smithtown offers a family-friendly atmosphere through its picturesque tree-lined streets. With the average annual household income of the region exceeding $110,000, Smithtown is among the more affluent Long Island towns. On the other hand, the average home value of around $710,000* works well for young adults and millennials who don’t have large budgets.

Driving to Manhattan can take around an hour and a half. However, Smithtown has a railroad station, so you may make good use of the LIRR as well. The Hamptons is a short drive away, as are the North Fork vineyards, the Blydenburgh County Park, and the Caleb Smith State Park.

Hauppauge Shopping Center, Maple Commons Shopping Center, and Nesconset Plaza offer numerous alternatives for shoppers.

The Smithtown Central School District includes two high schools, three middle schools, and eight elementary schools.

Bellmore

Located along the south shore of the island in Nassau County, Bellmore is a hamlet that offers peace and quiet. The ideal suburban setting of this picturesque waterfront community makes it perfectly suitable for young adults and millennials who are wondering where to live in Long Island.

The Bellmore railroad station ensures that your commutes to NYC remain hassle-free. Jones Beach Park is nearby, and it hosts various concerts and events throughout the year. The John F. Kennedy International Airport is around 15 miles away.

Bellmore Shopping Center houses several commercial establishments and shops. Robbie Plaza and Merrick Mall are easily accessible as well.

The school districts of Bellmore include the Bellmore School District, the Bellmore-Merrick Central High School District, and the North Bellmore School District. The highly-rated John F. Kennedy High School is open to Bellmore students. The annual Mathematical Olympiads for Elementary and Middle Schools take place in Bellmore.

The average home value in Bellmore is around $728,000*.

best places to live in long island for young adultsRoslyn

Roslyn, in Nassau County, might be up your alley if you’re after an affluent and airy neighborhood. One of the main reasons that put this village on the list of best neighborhoods in Long Island for families and older millennials is the quality of its schools. While Roslyn Public Schools serve seven communities, they cater to just around 3,000 students.

Students from Roslyn High School have a good acceptance rate across top colleges, and their average SAT scores are noticeably better when compared to the scores of students from other parts of New York. The Roslyn Union Free School District includes five schools – Roslyn High School, Roslyn Middle School, East Hills School, Heights School, and Harbor Hill School

Residents of Roslyn get several alternatives from which to choose when it comes to shopping. These come in the form of Harbourview Shoppe, Americana Manhasset, Wheatley Plaza, the Suburban Shopping Center, and TJ Maxx.

If you wish to get to Manhattan, all you need to do is catch a train from the Roslyn station. Driving to midtown could take around 40 minutes. The average home value in Roslyn is around $1,344,000*.

Massapequa

A little further east from Bellmore is Massapequa, a hamlet in Nassau County. Massapequa has a railroad station, so getting to Manhattan is easy. It has six elementary schools, as well as middle and high school alternatives, making it among the best neighborhoods in Nassau County for families and millennials.

If you love being around nature, you may use your free time to explore the bordering Massapequa Preserve. The Massapequa Cove makes for an idyllic fishing spot and recreational area.

For shopping, residents have easy access to Sunrise Mall, Holiday Park Shopping Center, Macy’s, HomeGoods, Marshalls, and Sears.

The average home value in Massapequa is around $704,000*.

Stony Brook

This hamlet on the north shore of the island in Suffolk County was founded as an agricultural enclave during the Colonial Era. It grew in prominence as a resort town and is now among the region’s major tourist and education hubs.

Schools in Stony Brook fall under the purview of the Three Village Central School District. Recognized as one of the best towns in Long Island, it is home to the popular Stony Brook School and Stony Brook University.

The region is connected to the LIRR network by the Stony Brook station. The Long Island Museum of American Art, History, and Carriages is in Stony Brook. Avalon Park and Preserve is no more than a short drive away.

Coventry Commons Center, Stony Brook Square, Smith Point Plaza, and Three Village Shopping Center are located within short driving distances.

The average median home value in Stony Brook is around $682,000*.

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Lake Ronkonkoma

Lake Ronkonkoma is a part of the Long Island towns of Brookhaven, Smithtown, and Islip in Suffolk County. While a major part of this census-designated place (CDP) is located in Brookhaven, the land that surrounds the actual lake is a part of Islip. This region is connected to the LIRR network through the Ronkonkoma railroad station. It functions as the western terminus of the Greenport Branch and the eastern terminus of the Ronkonkoma Branch.

The Sachem Central School District looks after public schools in Lake Ronkonkoma. The lakeside Lake Ronkonkoma County Park offers baseball fields, handball and basketball courts, a picnic area, as well as a fishing pier.

For shopping, residents of the area can turn to Lakeshore Plaza, Gatelot Plaza, Lake Grove Shopping Center, and Kohl’s.

The median home value in Lake Ronkonkoma is around $510,000**, making it suitable for young adults and millennials who are looking at affordable alternatives.

Holtsville

If you wish to limit your search to affordable houses in Long Island, Holtsville requires your attention as well. The average home value in Holtsville is around $575,000*. A major part of this hamlet is in the town of Brookhaven, whereas a small portion is also a part of Islip. The region is served by the Sachem Central School District.

The Holtsville train station was closed in March 1998 because of low ridership. Now, most commuters from the region make use of the Medford and Ronkonkoma stations. The Wildlife and Ecology Center Animal Preserve is in Holtsville.

Depending on where in Holtsville you live, you may shop at Waverly Shopping Center, Holbrook Center, Expressway Plaza, Morris Avenue Shopping Center, or Lake Shore Plaza.

Wantagh

Wantagh makes it to the list of the best neighborhoods in Long Island for young adults and millennials because of different reasons. Originally named “Jerusalem”, this hamlet in Nassau County is in close proximity to Jones Beach Island. The Wantagh railroad station connects its residents to Manhattan easily. Besides, the region boasts of some great schools.

The Wantagh Union Free School District serves the residents of this region. It consists of the Wantagh Elementary School, the Mandalay Elementary School, the Forest Lake Elementary School, Wantagh Middle School, and Wantagh High School. Wantagh holds the distinction of being the only School District in the state in which all schools have been acknowledged as National Schools of Excellence.

Some parts of the hamlet’s peripheral neighborhoods are served by the Seaford Union Free School District, the North Bellmore Union Free School District, and the Levittown School District.

The Wantagh State Parkway, the Sunrise Highway, the Seaford – Oyster Bay Expressway, and Merrick Road pass through Wantagh and they have major intersections or entrances/exits here.

Cherrywood Shopping Center, Wantagh Woods Plaza, and Willow Wood Shoppes are in close proximity.

The average median home value in Wantagh is around $707,000*.

long island neighborhoodsCommack

This CDP roughly corresponds to the hamlet with which it shares its name. It is located in the Long Island towns of Smithtown and Huntington, and both are a part of Suffolk County. Access to the LIRR network comes through Northport, Huntington, and Smithtown stations.

The region is served by the Commack Union Free School District. It has four primary schools, two intermediate schools, one middle school, and one high school. Commack is home to the Hoyt Farm Nature Preserve, the Whitman Hollow Park, and the Hamlet Golf & Country Club.

Commack residents may meet their shopping requirements by visiting the Mayfair Shopping Center, Commack Corners Shopping Center, Commack South Shopping Center, Commack Commons, Veterans Memorial Plaza, or Walmart.

The average home value in Commack stands at around $716,000*.

Jericho

Situated on Long Island’s North Shore, Jericho is a hamlet and CDP in Nassau County. It found a place in the top 50 places to raise a family in the U.S. by Niche in 2024. Residents who wish to make use of the LIRR may turn to Westbury, Hicksville, or Syosset stations.

Jericho has four schools, and public schools in the region are part of the Jericho Union Free School District. The Westbury Union Free School District is close by, as is the Hicksville Union Free School District. SUNY Old Westbury’s main entrance is in Jericho.

Residents don’t have to venture far to shop, given that the area is home to shopping malls such as Jericho Commons, Jericho Atrium, and Jericho Executive Plaza.

The average home value in Jericho is around $1,117,000*.

Syosset

Syosset is a hamlet and CDP in the Town of Oyster Bay in Nassau County. It is situated on the North Shore of Long Island. Residents of the region get easy access to the LIRR from the Syosset station.

Syosset has 11 schools, and public schools in the region are part of the Syosset Central School District. Plainview-Old Bethpage Central School District and Hicksville Union Free School District are close by.

Syosset Center, Syosset Plaza, Syosset Corners, and East River Plaza offer numerous options for shopping.

The average home value in Syosset is around $972,000*.

Merrick

Merrick is a hamlet and CDP in the Town of Hempstead in Nassau County. Situated on Long Island’s South Shore, several young families looking for good schools and proximity to water feel this is among the best areas to live in Long Island. Merrick has an LIRR station.

Merrick has 14 primary and secondary schools. Public schools in the region belong to the Bellmore-Merrick Central High School District or the North Bellmore Union Free School District. Other alternatives come from the nearby Freeport Union Free School District and the Bellmore Union Free School District.

Residents of Merrick can find various shops and other commercial establishments at Merrick Mall and Merrick Commons. The area also has a HomeGoods store.

The average median home value in Merrick is around $776,000*, which makes it one of the more affordable places to live in Long Island.

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West Islip

Situated on Long Island’s South Shore, West Islip is a hamlet and CDP in the Town of Islip. The region’s natural western boundary comes in the form of Hawley’s Lake, Deer Lake, Sampawams Creek, and Swan Creek. The Islip station gives residents of the region easy access to the LIRR.

West Islip is home to four elementary schools and two middle schools. Public schools in the area are part of the West Islip Union Free School District. The Bay Shore Union Free School District and the North Babylon Union Free School District also offer some alternatives.

The Southdown Marketplace in West Islip is a well-rated supermarket. Other shopping alternatives come in the form of Captree Village, South Bay Commons, and Gardiner Manor Mall.

The average home value in West Islip is around $653,000*, making it one of the best Long Island neighborhoods from an affordability point of view.

Valley Stream

This village in Nassau County is situated in the southwest part of the town of Hempstead. In 2017, Money Magazine picked Valley Stream as the best place to live in Long Island. The area offers a dense suburban feel and boasts of several restaurants, bars, coffee shops, and parks. Valley Stream has an LIRR station.

As one of the best neighborhoods in Nassau County, Valley Stream has a total of 18 schools. Public schools in the region are part of the Valley Stream Central High School District or the Elmont Union Free School District. The Hewlett-Woodmere Union Free School District and the Valley Stream 13 Union Free School District are nearby.

Shopping alternatives come in the form of a Walmart Super Center, Green Acres Mall, Green Acres Commons, and Macy’s.

The average home value in Valley Stream is around $678,000*.

Levittown

Previously known as Island Trees, Levittown is a hamlet and CDP in the Town of Hempstead in Nassau County. It is situated between the villages of Farmingdale and Hempstead. While the region does not have its own LIRR station, residents may access the train network through Hicksville, Bethpage, Wantagh, or Bellmore stations.

Levittown has 11 primary and secondary schools. Public schools in the region are part of the Levittown Union Free School District or the Island Trees Union Free School District. The Bethpage Union Free School District and the Hicksville Union Free School District are nearby too.

Levittown Plaza, Levittown Mews, Nassau Mall, Gardiners Plaza, and Tri-County Mall give shoppers plenty from which to choose.

The average median home value in Levittown is around $632,000*, making it one of the best places to live in Long Island if you wish to buy a house without spending too much.

Plainview

Plainview is a hamlet and CDP in the town of Oyster Bay. It is situated near Long Island’s North Shore. Residents benefit through several parks nestled between homes, which is one of the reasons that put it on the list of the best neighborhoods in Long Island for families and millennials.

The 77,000 square meters Plainview-Old Bethpage Community Park is located on Washington Avenue. Depending on where you live, you could use the Hicksville, Bethpage, or Syosset LIRR stations.

Plainview has seven schools. Public schools in the region belong to the Plainview-Old Bethpage Central School District or the Bethpage Union Free School District. The Syosset Central School District and the Hicksville Union Free School District also offer some alternatives.

Plainview Shopping Centre, Woodbury Plaza, and Manetto Hill Plaza are home to a number of shops and other types of businesses.

The average home value in Plainview is around $848,000*.

best places to live in long islandEast Meadow

East Meadow is a hamlet and CDP in the Town of Hempstead in Nassau County. Incidentally, there are almost no meadows in the region anymore because of post-World War II development and urbanization. The Nassau University Medical Center and Eisenhower Park are located in East Meadow. Access to the LIRR network comes through Hicksville and Westbury stations.

The region is home to six primary and secondary schools, and public schools here are part of the East Meadow Union Free School District. The North Merrick Union Free School District and the Uniondale Union Free School District are in close proximity.

Residents of East Meadow are spoilt for choice when it comes to shopping. Their options include East Meadow Mall, Clearmeadow Plaza, Meadowbrook Square, Stew Leonard’s Plaza, Stop & Shop, Marshalls, and Walmart.

The average home value in East Meadow is around $704,000*.

How Do You Go About Buying a Home?

Once you’ve decided to transition from being a renter to a homeowner and have narrowed down on a few nice neighborhoods in Long Island, you need to start looking for homes based on your specific needs. For instance, how important is proximity to an LIRR station for you?

Data suggest that there is a significant drop in the availability of entry-level homes, so people looking for affordable places to live in Long Island might have to deal with limited options. However, the average home value appreciation of 3.4% from March 2023 to March 2024 can serve as good news for prospective buyers.

Here are some other aspects that need your attention if you plan to buy a home in Long Island any time soon.

Mortgage Rate Trends

According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage (FRM) increased by 0.61 percentage points from April 2023 to April 2024. As of April 11, 2024, the average interest on a 30-year FRM stood at 6.88%. These numbers bode as good news for prospective home buyers, all the more so because of the significant increase in interest rates from April 2023 to October 2023. What also helps is that most experts expect mortgage rates to remain favorable in the near future.

Affordability

A simple rule of thumb is to limit your budget to three times that of your annual household income. For instance, if you and your spouse earn $150,000 each year, set the higher end of your budget at $450,000.

Down payment

Save as much money as you can to put toward the down payment. The more you pay as down payment, the less you end up paying as interest through the course of the loan term.

Get Prequalified

Getting preapproved for a mortgage gives you a good indication of how much you qualify to borrow, so you may limit your search to homes that match your budget. It also gives sellers an indication that you are a serious buyer. Not getting preapproved, on the other hand, exposes you to deal breakers in the underwriting process after you have narrowed down on a house you wish to purchase. As a result, it is important that you get prequalified before beginning your search for a suitable home.

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Attend Open Houses

Attending open houses gives you an easy way to look at what’s on offer. You get insight into the existing market, while also getting to identify the best Long Island neighborhoods based on your specific needs. By looking at homes that are up for sale, you may determine what amenities you wish to have, as well as ones you may do without. When you’re attending open houses, take time to explore the neighborhood as well.

Making an Offer

Once you find a house you like, make a competitive offer. Remember that other prospective buyers might also be interested in buying the same home. Homes in some of the best areas to live in Long Island might be subject to bidding wars, so prepare ahead of time. While paying more than the asking price might work for some, walking away might be the order of the day if it comes to stretching your budget.

Choosing the Right Mortgage Lender

No matter which of the Long Island neighborhoods you choose, working with a good mortgage lender is important. When selecting a mortgage lender, you must look beyond the interest rate on offer. Different types of fees associated with your loan can increase its cost significantly. Besides, a good lender provides flexibility in terms and conditions. For instance, some lenders let borrowers make weekly, fortnightly, or monthly repayments. Another aspect that requires your attention is the level of customer service any lender provides.

What Type of Loans Are There?

You get to choose from two basic types, government-backed and conventional loans.

  • Government-backed mortgages. These come in the form of USDA loans backed by the U.S. Department of Agriculture (USDA), VA loans guaranteed by the Department of Veterans Affairs (VA), and FHA loans insured by the Federal Housing Administration (FHA). If you qualify for any of these loans, you do not have to worry about making a substantial down payment.
  • Conventional mortgages. These are typically offered by mortgage lenders, banks, credit unions, and private lenders. When compared to government-backed alternatives, these tend to require higher down payments. In addition, your credit score has an effect on the approval process and the interest rate you get.

Conclusion

With an area that covers over 1,400 square miles, Long Island has homes to cater to different needs. Whether you want your family to live in the lap of nature or want your kids to have a great education, you get to choose from various Long Island towns, hamlets, and villages. What also helps is that the island has neighborhoods to suit different budgets.

Once you’ve narrowed down on the best neighborhoods in Long Island, the next step is to look for a reliable mortgage lender and determine how much you can afford to borrow. You may then look for homes accordingly.

 

 

* Values taken from Zillow.com on April 17, 2024.

** Values taken from Redfin.com on April 17, 2024.

Is Refinancing a Mortgage Right for You?

Refinancing a mortgage

Several homeowners think about refinancing their mortgages for a variety of reasons. While someone might refinance for a lower interest rate, someone else might choose this path to move from an adjustable interest rate to a fixed-rate mortgage. In any case, knowing how the process works is crucial in determining if mortgage refinancing is the best option for you.

What Is a Mortgage Refinance?

Refinancing a mortgage does not involve making changes to the terms of your existing mortgage. Instead, it involves replacing an existing mortgage with a new one. This requires applying for a new mortgage, and once a lender approves your application, it repays your old loan. After this happens, you need to start making repayments toward the new one, and the previous mortgage no longer exists. Some people even choose to consolidate their other debt into a new mortgage.

Can You Refinance Your Mortgage?

Since refinancing a mortgage requires applying for a new one, you need to meet certain eligibility criteria. These depend on the type of mortgage you select although some lenders have their own requirements as well.

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The Time Period

One of the most common questions surrounding refinancing a mortgage is “Is it always possible to refinance a mortgage?” In several scenarios, it is possible to refinance a mortgage without needing to wait. Exceptions come in the form of:

  • If you wish to refinance with your existing mortgage provider, you might need to wait for up to six months.
  • To refinance with a cash-out mortgage, your property should have served as your primary residence for at least 12 months prior to your application.
  • Qualifying for an FHA streamline refinance requires having made a minimum of six monthly payments, with the mortgage being at least 210 days old.
  • With VA loans, you need to wait until you make at least six monthly payments or for at least 210 days after making the first payment.
  • If you opt to refinance through a streamlined or non-streamlined USDA loan, all your payments during the last 180 days should be on time.
  • USDA’s streamlined assist refinance program requires having made all your payments during the last 12 months on time.

The 12-month waiting period that applies on cash-out refinancing does not apply if you’ve inherited the property or received it through a separation or divorce.

Credit Score

Applying for a mortgage requires meeting credit score requirements and this is no different with mortgage refinancing. More often than not, the minimum credit score you need depends on the type of mortgage you select, although some lenders have their own minimum limits. Here are the minimum credit scores you typically need to qualify for different types of mortgages.

  • Conventional loans: 620
  • VA loans: 620
  • USDA loans: 640
  • Jumbo loans: 700
  • FHA loans: 500 with a 10% down payment, and 580 with a 3.5% down payment

If you don’t meet this requirement, it is best that you work on improving your credit score before applying for a new mortgage.

Home Equity

Home equity refers to how much of your home’s value you own. This is the amount you stand to receive if you sell your home and pay off your mortgage entirely. When it comes to conventional and cash-out refinancing, you typically need at least 20% equity to qualify. However, some lenders can go down to 10%.

If you have less than 20% equity in your house, you may check if you qualify for VA cash-out refinancing. While the Department of Veteran Affairs allows eligible applicants to refinance with no equity at all, most lenders who provide VA loans tend to cap it at 10%.

mortgage refinancing

Debt-to-Income Ratio

Your debt-to-income (DTI) ratio indicates how much of your monthly income goes toward servicing your debt. It requires dividing the total of all your monthly payments by your gross monthly income. You get to see this number as a percentage. Most lenders look for DTI ratios of 40% or lower. The higher it is, the more difficult it is to qualify for mortgage refinancing. If your DTI is higher than 40%, consider reducing your debt before applying for a new loan.

Income

No matter which type of mortgage you wish to get, you may expect lenders to take a close look at your income because it has a significant effect on your ability to repay the loan. As a result, you will need to provide proof of income that comes in the form of your employment history, tax returns, W-2s, 1099s, and recent paystubs.

When it comes to mortgages for self-employed borrowers, you’ll need to provide tax returns for the preceding two years, year-to-date balance sheets, business account statements, and profit-loss statements. Applicants with W-2s may look forward to a simpler process.

What Is the Purpose of Refinancing a Home?

Not everyone refinances a mortgage for the same reason. Here are the most common reasons to consider refinancing:

  • Lower interest rate: Interest rates keep changing. If there is a noticeable difference between your mortgage’s interest rate and existing rates, you might end up saving money by paying less toward interest.
  • Term change: Some choose to refinance their mortgages to reduce or extend the term of the loan. For example, your existing mortgage comes with a 30-year term. However, you feel that you can afford to make larger monthly payments now and wish to refinance to a 15-year alternative. The opposite can hold true as well.
  • Changing the type of mortgage: Switching from one type of mortgage to another is not uncommon and one of the most common examples is refinancing an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. If you switch from an FHA loan to a conventional loan, you get to stop paying mortgage insurance premium (MIP).
  • Using your equity: If you opt for a cash-out refinance, you get to borrow more money than you owe toward your existing mortgage. If the value of your home has increased, you might be able to get adequate funds to consolidate your other debts or renovate your home. When you borrow against the equity you build in your home, you stand to benefit from considerably lower interest rates than other types of loans.
  • Paying down your balance: Not a very common option, a cash-in refinance involves getting a new mortgage and making a lump sum payment at the onset to bring down its balance. You may consider this alternative if you want to stop paying private mortgage insurance (PMI) or have negative equity.

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How to Refinance Your Mortgage?

The process of refinancing an existing mortgage is largely the same as the one you follow when you apply for it in the first place. This is because you need to apply for a new mortgage and a lender needs to approve your application. However, you need to begin by establishing a clear goal. For example, do you want to lower your monthly payment, extend the loan term, or use the equity you’ve built? Then, you need to follow these steps.

  • Check your credit score: While your credit score has an effect on the type of mortgage you may get, it also affects the interest rate that comes with your mortgage. Simply put, the better your credit score, the lower the interest rate you stand to get. If your credit score is less-than-desirable, consider improving it before moving forward.
  • Look at the equity you’ve built: Having less than 20% equity in your home limits your options when it comes to the number of lenders who might be willing to give you a new mortgage.
  • Select a refinance type: Determine the type of mortgage refinance that might work best for you based on your specific requirements. Your options include rate and term refinance, cash-out refinance, cash-in refinance, and no-closing-cost refinance.
  • Submit your application: Once you select a lender, submit an application along with all the required documents surrounding your income, assets, and debt. The lender uses the information you provide to determine if you qualify.
  • Consider locking the interest rate: Your lender might give you the option of locking the interest rate it offers so it does not change before the loan’s closing, typically by paying an added fee. Lenders usually offer rate locks for 30, 45, or 60 days. Some offer rate lock extensions too. The flipside of not locking the rate is that it might increase by the time you reach the closing table, although it may decrease as well.
  • Wait for the underwriting to complete: The underwriting process involves verifying all the information and documents you provide with your application. While your lender will scrutinize your finances and creditworthiness, a home appraisal is also a part of the process.
  • Get ready for an appraisal: You may expect the lender to carry out a home appraisal at this stage to determine your home’s existing market value. If you’ve carried out extensive repairs/improvements or modified the home significantly after purchasing it, let the appraiser know as it might result in a higher appraised home.
  • Close the loan: With the underwriting and home appraisal out of the way, you move to the closing table. Make sure you go through the Closing Disclosure carefully in advance and don’t hesitate to seek clarification from your lender if you have any doubts or questions. If you have not rolled in the closing costs in your new mortgage, you’ll need to pay them at this stage.

Is it better to refinance your mortgage?

How Closing Costs Work

Bear in mind that there is no such thing as a no-cost mortgage refinance and you will need to pay closing costs. However, several lenders give you the option of rolling the closing costs into the loan. This way, you don’t have to pay closing costs at the onset but get to pay them through the course of the loan term because they become a part of the principal amount.

Pros and Cons of Refinancing Your Home

When interest rates fall, it’s common for homeowners to wonder if they might benefit by refinancing their existing mortgages, and there are other advantages as well. However, it is prudent to look at the negative side of refinancing before moving forward with the process.

Advantages of Refinancing a Home Loan

  • Possibility of getting a lower interest rate
  • Ability to increase or decrease monthly payments
  • Pay off the new loan sooner
  • No need to make a down payment
  • Get cash out and use the money for different purposes
  • Consolidate high-interest debt and save on interest charges
  • Move from an adjustable-rate to a fixed-rate mortgage
  • Option to add a co-borrower

Disadvantages of Refinancing a Home Loan

  • Need to pay refinancing fees/closing costs
  • Taking cash-out can bring down the equity you hold
  • A longer loan term typically means paying more toward interest
  • A slight negative impact on your credit score

Conclusion

If you choose to take the mortgage refinancing path, you get the ability to change the terms of your mortgage by lowering your monthly payments or paying it off sooner than initially planned. Besides, it can also give you access to funds if you want to use the equity you’ve built in your home. However, as with any major financial decision, it’s important that you weigh the pros and cons, and you may also want to discuss it with your financial planner.

Once you determine that refinancing a mortgage is right for you, take time to compare your options, be it in the form of the types of mortgages for which you may qualify or the lender you should select. Remember that choosing a reliable mortgage provider can make your refinancing process seamless and rewarding.

8 Financial Benefits of Moving to Florida

Financial Benefits of Moving to Florida

If you’re thinking about relocating to Florida and play your cards right, there’s a good chance you’ll end up having a great experience. Sure, you’ll enjoy sunshine all year round, have beaches in close proximity, and get easy access to some amazing national parks. In addition, you also stand to gain from the financial benefits of moving to Florida.

1. Lower Taxes

Many people move to the Sunshine State each year, yet not everyone is aware of the tax benefits the state has to offer. So, what are the tax advantagesof moving to Florida? These come in the form of no personal income tax, lower property taxes, no estate tax, and more. However, while you might get to save on taxes, you should get all the information about possible tax benefits by contacting your account/financial planner or tax advisor.

Personal Income Tax

Taxes are burdensome, to say the least, and Florida aims to ease this burden on its residents to some degree. One of the tax benefits of living in Florida is that the state does not charge any personal income tax. What this means is that no part of your paycheck goes toward paying state taxes. Depending on your income, this could lead to significant savings.

Consider this – you live in Pennsylvania and earn $100,000 per year, paying 3.07% as personal income tax in 2024. By moving to Florida and earning the same amount, you save $3,070 each year.

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Tax on Retirement Benefits

Since Florida does not impose personal income tax, it does not tax social security benefits, pensions, IRAs, and 401(k)s. This gives retirees the means to stretch their income a little more. What also helps is you don’t have to pay personal income tax if you choose to work part-time as a retiree.

Estate/Inheritance Tax

Thanks to a federal change, Florida eliminated the provision of charging estate tax on December 31, 2004. As a result, when there is a transfer of estate or other assets upon someone’s demise, no estate or inheritance tax applies to the transfer. What this means is if you inherit property or money, you don’t have to pay taxes to the state.

Property Tax

Probable benefits in property taxes apply to homeowners and not renters. Besides, this depends on the state from which you move. Consider these state-wise annual property tax rates on average-value homes collated by BankRate for the 2022 tax year.

  1. New Jersey: 1.79%
  2. Illinois: 1.78%
  3. Connecticut: 1.57%
  4. Vermont: 1.43%
  5. Nebraska: 1.36%
  6. Pennsylvania: 1.29%
  7. New Hampshire: 1.28%
  8. Ohio: 1.27%
  9. New York: 1.26%
  10. Iowa: 1.25%

The same list puts Florida at the 30th spot, with its annual property tax rate on an average-value home at 0.67%. So, is it worth moving to Florida for tax purposes from the point of view of paying property taxes? It can be, if you move from the 29 states that are above Florida on this list.

In addition, you also stand to bring down your property’s taxable value by up to $50,000 with the Homestead Exemption. While one half of it applies to all the taxing authorities, the other half does away with School Board taxes and is applicable on properties that have assessed values of over $50,000.

2. Affordable Housing

Data released by World Population Review surrounding median home prices by state indicates that the median home value in Florida stands at $407,200. The top 10 on the list are:

  1. New York: $819,900
  2. California: $785,900
  3. Hawaii: $720,200
  4. District of Columbia: $668,250
  5. Washington: $618,000
  6. Massachusetts: $614,700
  7. Colorado: $580,900
  8. Utah: $529,600
  9. Oregon: $510,900
  10. New Jersey: $477,600

With Florida taking the 18th spot, it’s only fair to include housing costs as one of the financial benefits of moving to Florida. However, much like any other state, there can be a significant difference in the prices of homes based on where you wish to purchase one, with smaller towns offering more affordable options than large metropolitan areas. Besides, how expensive a house you can afford also plays a role.

Do you really save money by moving to Florida?

3. Business-Friendly

Florida continues to rank among the top states in the country for business because of a streamlined regulatory environment, cost of doing business, and pro-business tax policies. Consider these statistics collated by Florida Power & Light Company and SelectFlorida that highlight the state’s business-friendliness.

  • Florida takes the top spot for offering the best tax climate in the Southeast.
  • It is the number one state in the country for attracting and developing talent.
  • It ranks as the second best state for doing business in the U.S.
  • It ranks number one for innovation.

The state’s 5.5% corporate tax rate helps it attract mid-sized and large businesses alike, and you may also benefit from clean energy-based tax exemptions. It comes as no surprise, then, that the Tax Foundation places Florida at the fourth spot in its State Business Tax Climate Index.

4. A Thriving Economy and Job Market

Data shared by USAFacts indicates that Florida’s economy ranks fourth in size among all the states. In addition, its unemployment rate of 2.9% in November 2023 was lower than the country’s overall unemployment rate. It also highlights that the economic growth of the state is higher than the country’s overall average. Given that the state boasts of a thriving economy and job market along with a business-friendly climate, scores of businesses have already chosen to shift base to Florida.

According to HireAHelper’s 2023 Corporate Relocation Study, 86% more corporations have moved their headquarters to Florida since 2017 in comparison to the number of businesses that have moved their head offices out of the state, which is the highest gain for any state. The three cities that have gained the most include Jacksonville, Tampa, and Miami – putting them on the list of the top cities in the country for relocation of corporate headquarters.

Some of the prominent names that have taken to Florida, either by shifting their headquarters or by building/increasing their presence here, include:

  • Blackstone
  • Lockheed Martin
  • Goldman Sachs
  • Paysafe
  • Luminar Technologies
  • Argo AI
  • Amazon
  • Walmart
  • FedEx

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5. Reasonable Cost of Living

Florida’s cost of living index stood at 100.3 in 2023, which was pretty much at par with the national average. This index accounts for different costs like housing, groceries, healthcare, transportation, and utilities. Given the reasonable cost of living in Florida, you may expect to get more value for your dollar if you move here from a state such as Hawaii, Massachusetts, California, New York, Maryland, or Washington.

6. Affordable Higher Education

SelectFlorida points out that Florida has remained the number one state in the U.S. for higher education for five consecutive years, and that it awards more than 100,000 science and engineering degrees each year. However, the reason higher education makes it to the list of the financial benefits of moving to Florida is the affordability factor.

If you plan to send your children to college, Florida not only provides some great alternatives from which to choose, but also ensures providing good education without burning a hole in your pocket.

EducationData highlights that the average in-state tuition at public institutions in the U.S. during the 2019-2020 academic year was the lowest in Florida, at $4,463. In addition, the average cost of studying at local community colleges during 2020-2021 was 28.43% less than the national average, and the average cost of studying at private universities during the same period 9.65% less than the national average.

7. Low-Cost Vacation

Florida serves as the perfect base for people who enjoy vacationing and traveling. For starters, the Sunshine State is home to some highly sought-after tourist destinations, from beaches to theme parks to national parks. This eliminates the need to take long-haul trips for the holidays because there’s a good chance that the experience you seek is not far from home.

Florida is great for people who like to take a cruise once in a while. This is because you no longer have to spend money to take a flight to your port of choice as the state has a few popular ones of its own. These include:

  • Port of Miami – Miami
  • Port Tampa Bay – Tampa
  • Port Canaveral – Cape Canaveral
  • Port Everglades – Fort Lauderdale

If you don’t mind a long drive, you also benefit from some great options that the neighboring states have to offer. From Tennessee’s Smoky Mountains to Georgia’s history-soaked Savannah to the live music scene and vibrant nightlife in Louisiana’s New Orleans, you’re only a road trip away from a quick getaway.

Is it worth relocating to Florida?

8. Elderly-Friendly

Data released by the Population Reference Bureau indicates that Florida was home to the second highest percentage of population aged 65 years or older in 2020, with 21.3% of its population above this mark. Given the significant number of seniors who live in this state, it’s fairly common to find businesses that offer generous senior discounts. Several senior communities and clubs also play their part by providing affordable amenities and activities.

In addition, the Florida Department of Elder Affairs provides an array of programs and services that can help keep finances in check, some of which include:

  • Home Care for the Elderly (HCE)
  • Medicaid Long-Term Care Services
  • Memory Disorder Clinics
  • Program of All-Inclusive Care for the Elderly (PACE)
  • Adult Care Food Program
  • Elder Farmers Market Nutrition Program
  • Health & Wellness

Should You Buy or Rent?

If you decide to move to Florida and are unsure if you should live on rent or buy a home, pay attention to these aspects.

  • Down payment. Buying a house typically involves getting a mortgage, for which you’ll need to make a down payment. While there are some types of mortgages that don’t require down payment, you need to qualify for them to enjoy this benefit.
  • Mortgage payments. Once you get a mortgage, you need to keep making mortgage payments every month until you pay off the loan completely.
  • Job security. Having a steady source of income ensures that you can keep making your mortgage payments in a timely manner.
  • Creditworthiness. Getting a mortgage can be difficult if you have average or poor credit. On the other hand, the better your credit score, the lower the interest rate you stand to get.
  • Level of commitment. Buying a house requires some level of commitment and you should consider taking this path if you plan to live in the house you purchase for five or more years.

Benefits of Buying

Based on where you live, buying a home might cost you less per month than living on rent, especially if you qualify for a VA loan or USDA loan. Once you start making payments toward your mortgage, you begin building equity in your house, and as you keep repaying the loan, your equity keeps increasing. Buying a home can result in tax savings because you may include a percentage of the amount you pay toward interest as deductions, and this is something you should discuss with your tax adviser.

As a homeowner, you don’t have to worry about relocating each time your landlord raises your rent.  Another benefit of buying a home is you get the freedom to make changes based on your likes and dislikes.

Conclusion

So, is it worth relocating to Florida and do you really save money by moving to Florida? The answer to both questions is in the affirmative, provided you’re moving from a place that has a higher overall cost of living. Given that Florida ranks higher than most states in the country when it comes to its economy, taxes, housing costs,  job market, and education, there’s a good possibility that moving here might work well for you.

If you plan to purchase a home once you move to Florida, start by arriving at a suitable budget and identifying the type of loan you wish to get. The next step should be to select a reliable mortgage provider and get pre-approval. This gives you an indication of how much the lender is willing to lend. Then, look for homes accordingly and consider using the services of a real estate agent to streamline the process.

Should You Get a Long- or Short-Term Mortgage?

long or short term mortgage

One of the most important factors to consider when getting a mortgage is how long your mortgage term should be. This decision can have a significant bearing on your finances in the years that follow. There is no predefined best mortgage term length because this aspect varies based on individual requirements. As a result, you need to think about the specifics of your case to determine if a short- or long-term mortgage might work better for you.

 

What Is a Mortgage Term?

The term of a mortgage refers to the duration your lender gives you to repay the loan entirely. In, the U.S., the most common mortgage term is 30 years, and you also get to choose from 10, 15, 20, and 25 years. However, not all mortgage providers offer the same options. One of the key reasons this factor plays a vital role in getting a mortgage is that it can have a significant impact on the overall cost.

 

What Is a Short-Term Mortgage?

Short-term mortgages have terms ranging from 10 to 15 years. While it is possible to find mortgages with even shorter terms, it’s not easy. From a borrower’s point of view, short-term mortgages tend to come with lower interest rates and higher monthly payments than long-term mortgages. In addition, a short-term mortgage enables you to build equity in your house faster.

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What Is a Long-Term Mortgage?

The duration of a long-term mortgage extends to 15 years or more. 30-year fixed-rate mortgages hold the largest market share in the country. The longer your loan term, the more time you get to repay the money you borrow, which translates to lower monthly payments. However, you end up paying more toward interest.

Usually, 15-year mortgages come with the most competitive interest rates. If you get a 30-year mortgage, you typically still have the option of paying off the entire money ahead of time without incurring a penalty.

While some lenders provide 35- and 40-year mortgages, they don’t fall under the conforming loan bracket. This means they don’t have to abide by the rules for conventional loans set by Fannie Mae and Freddie Mac.

 

Why Are Long-Term Mortgages Popular?

Long-term mortgages, especially with terms of 25 years and more, are becoming rather popular with first-time homebuyers, which is mainly because of the affordability factor. After all, rising property prices are making it increasingly difficult for borrowers to opt for short loan terms because they come with significantly higher monthly payments. A 30-year mortgage, when compared to a 15-year alternative, can lower monthly payments greatly, allowing a first-time buyer to move forward with buying a home.

 

Potential Drawbacks of Long-Term Mortgages

One disadvantage of getting a long-term mortgage is you’ll end up paying more in the form of interest. It also means you’ll have to keep making monthly payments for longer. For example, if you get a 30-year mortgage in 2025 and stick to making just the monthly payments, you’ll own your home outright by 2055. However, the prospect of needing to make monthly payments is not necessarily negative because you no longer pay rent and continue building equity in your home. Plus, it’s common for incomes to increase with time.

mortgage long term or short term

Is It Better to Have a Short or Long Mortgage?

The answer to, “Is a long- or short-term loan better?” depends on your circumstances, and it’s important to understand the key differences between the two. Given that you need to make payments toward a long-term mortgage over a prolonged period, it costs less per month when compared to a short-term mortgage. However, it also means that the overall cost of the mortgage will increase because you’ll need to pay interest charges over the long term too.

While a short-term loan increases your monthly payments, you get to pay off the entire balance sooner. This means you end up paying less interest.

Consider these examples to get an idea of the difference in interest charges based on your loan term. In both examples, the home price is $200,000 and you make a $40,000 down payment.

30-Year Fixed-Rate Mortgage

  • Interest rate. 6.61%
  • Monthly payment. $1,022.91
  • Total of 360 Mortgage Payments. $368,248.01
  • Total interest. $208,248.01

15-Year Fixed-Rate Mortgage

  • Interest rate. 5.93%
  • Monthly payment. $1,344.13
  • Total of 180 Mortgage Payments. $241,942.95
  • Total interest. $81,942.95

One way to determine which loan term might work best for you is to use an online mortgage calculator. You may view existing weekly averages of interest rates on the Freddie Mac website, which you can then use in your calculations. This will give you a clear indication of how your monthly payments will vary based on different loan terms, and you may choose one according to your affordability.

 

15- Or 30-Year Mortgage

While getting a 15-year loan term can save you a tidy sum of money in the long run, you need to make sure you can afford to make the higher monthly payments. If you feel you might face challenges, consider going with a 30-year mortgage. You may also want to consider when you would like to be mortgage-free. For example, if you wish to pay off your mortgage before you retire in the next 26 years, a 25-year loan term might be the way to go.

A 15-year loan term is ideal if you can make your monthly payments comfortably, with your budget having adequate room to meet your other financial obligations and expenses. It can also work well if you wish to build equity quickly, which you may then use to pursue other financial goals by getting a home equity loan, home equity line of credit, or cash-out refinance.

Older homebuyers who build enough equity in their homes by the time they are 62 years of age may even consider taking reverse mortgages in the future.

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Is It Better to Get a Longer Mortgage and Overpay

Most lenders let you pay up to 20% of your loan balance every year without imposing any fees or penalties. If you prepay your mortgage or make extra payments, you can get the money you pay to apply to the loan’s principal amount and not the interest. By bringing down the principal amount, the amount you need to pay as interest reduces too. Some other benefits of making extra payments include:

  • Build equity faster
  • Pay off your mortgage sooner
  • Bring down your debt-to-income ratio (this can help you qualify for lower interest rates on loans you take in the future)

 

Find Out About Prepayment Penalty

Before you decide to make extra payments toward your mortgage, find out if your lender charges a prepayment penalty. This penalty usually applies if you sell your home, refinance your mortgage, or make a substantially large payment. In addition, when applicable, prepayment penalties typically stay in place only for the first three years of a loan’s term. While some types of loans come with prepayment penalties, not all do. For example, it is illegal to charge prepayment penalties on VA loans issued to members of the military and single-family FHA loans.

 

How to Pay Off a 30-Year Mortgage Sooner?

More often than not, homeowners can pay off their 30-year mortgages early if they adhere to a few simple ground rules. For starters, you need to understand how mortgage payments work with regard to amortization. In simple terms, it refers to how a lender applies your payment toward the principal amount and the interest.

When you start repaying your mortgage, a major portion of your payments go toward interest charges and only a small percentage covers the principal. Toward the end of the loan term, given that you have already paid most of the interest, much of your payment covers the principal. To build equity, you need to bring down the principal amount. The sooner you do so, the quicker you get to build equity.

If you want to pay off your mortgage faster, these pointers might be of assistance. In the first three instances, you need to instruct your lender to apply the extra payment toward the principal and not the interest.

  • Make larger monthly payments. If your budget permits, start making more than the required monthly payment. You may increase or decrease the extra amount at any time.
  • Make extra one-time payments. If you cannot commit to making extra payments each month, you may make a lump sum payment of any amount at any time. This is a great option if you receive extra funds.
  • Make biweekly payments. If you make a payment every two weeks instead of once a month, you end up making one full extra monthly payment each year.
  • Opt for a mortgage recast. Recasting a mortgage involves making a substantial lump sum payment and then asking your lender to re-amortize your loan based on the reduced principal amount. However, not all mortgages allow recasting, and this is something you need to check with your lender. In this case, while the loan’s term and interest rate remain the same, you get to make lower monthly payments. You save in interest charges as well.

short or long term mortgage

Should You Refinance a 30-Year Mortgage to a 15-Year Mortgage?

If you plan to refinance an existing 30-year mortgage to a 15-year mortgage, the first thing you need to consider is whether you will be able to keep up with the higher monthly payments over a period of time. Then, you need to look at the difference between the existing interest rate on your mortgage and the rate you qualify for on a new 15-year mortgage.

While a lower interest rate can lead to monetary savings, you also need to account for the expenses associated with getting a new mortgage, such as loan origination fees and closing costs. If you wish to refinance a mortgage within the first two to three years, you might need to account for a prepayment penalty too.

Since different variables can be at play when you refinance a mortgage, make sure you carry out your calculations in advance. If you don’t see yourself coming out on top, making extra payments toward your existing mortgage might be a better solution.

 

Are Adjustable Rate Mortgages Short-Term?

Adjustable rate mortgages (ARMs) are not short-term and they typically come with 30-year loan terms. Unlike a fixed-rate mortgage where your interest rate remains the same through the course of the loan term, an ARM comes with an interest rate that’s fixed for an initial period and then begins to change based on existing market conditions.

The initial period when the interest rate remains fixed is typically short-term and may vary from three to ten years. How often interest rates change after that depends on the specific type of ARM you get.

  • 3/1 or 3/6 ARM. The interest rate remains fixed for the first three years and then changes once every year or six months.
  • 5/1 or5/6 ARM. The interest rate stays the same for the first five years and then changes once every year or six months.
  • 7/1 or7/6 ARM. There is no change in the interest rate during the first seven years, after which it revises every year or six months.
  • 10/1 or10/6 ARM. In this case, the interest rate remains the same for the first 10 years and then changes every year or six months.

 

Conclusion

If your budget permits, a short-term mortgage can be a great way to buy a house and build equity quickly. Long-term mortgages, on the other hand, have given scores of Americans the ability to go the homeownership way because they come with more affordable monthly payments. Whether you should opt for a long- or short-term mortgage essentially boils down to your circumstances, and if you’re still unsure about which might work better for you, consider discussing your situation with a reliable mortgage provider.

Meadowbrook Named a Top Workplace of 2024 by Scotsman Guide

Westbury, NY — January 3, 2023 — Meadowbrook Financial Mortgage Bankers has been recognized nationally as one of the Top Workplaces of 2024 by Scotsman Guide.

Scotsman Guide is a leading resource for mortgage loan originators nationwide. Esteemed as the industry benchmark for mortgage rankings, they select the companies that stand out amongst the rest. Top Workplaces showcases mortgage companies around the country and all that makes them unique. To make this exclusive list, the editors assessed Meadowbrook’s achievements in operations, DEI, philanthropy, benefits, and corporate culture. Companies who excelled in multiple categories were included on the list of 2024 Top Workplaces.

The past year was filled with various challenges for mortgage professionals. The team at Meadowbrook made a tremendous effort to provide its employees with the support, training, and resources needed to succeed in the volatile market.

“This is a huge accomplishment for Meadowbrook,” said E.J. Gilbride, Executive Vice President of Sales & Mortgage Loan Originator. “Being recognized nationally as a Top Workplace of 2024 is a testament to our unwavering commitment to fostering a supportive and thriving environment at Meadowbrook. This accolade reflects our dedication to our employees and our belief that a strong, collaborative culture is the cornerstone of our success.”

The employees are Meadowbrook’s greatest asset, which is why they celebrate new ideas, personal growth, and collaboration across all departments. This award is not only a testament to past successes, but also motivation to continue evolving within the mortgage industry.

“This achievement speaks to the dedication of every employee at Meadowbrook,” said Erica Wetherall, Executive Vice President – Chief Compliance Officer. “It motivates us to continue our pursuit of excellence in all facets of our operations while fostering an environment where every employee feels empowered and valued.”

By cultivating a strong company culture, employees are able to flourish in their roles. This recognition serves as confirmation that leading with passion and supporting each and every employee is at the forefront of Meadowbrook’s success.

For more information on Meadowbrook, please contact Nicole Andretta at nandretta@mfmbankers.com or (516) 893‑1836.

About Meadowbrook

Meadowbrook Financial Mortgage Bankers Corp. was founded in 2008 with a mission to make the homeownership process simple by providing best-in-class turnaround times, communication, and education throughout the mortgage financing process. Licensed in 26 states, the New York-based mortgage lender prioritizes integrity, transparency, and customer-centricity with each and every client. The team emphasizes the importance of financial education to build lasting relationships with clients and partners based on trust and mutual respect. As an equal opportunity mortgage lender, we take great pride in our efficient processes, extensive product suite, and award-winning company culture.