By Adam Smith

The North Jefferson News



Buying a house in the current economic climate may not seem like a wise investment, but one north Jefferson County mortgage specialist disagrees.

“The time to buy couldn’t be better,” said Aaron Box, vice president of Hutson Mortgage Company in Gardendale.

More importantly, first-time buyers have two incentives to consider — a 4.875 fixed-interest rate on a 30-year loan and an $8,000 tax credit, available until Dec. 31. Lowered interest rates may also appeal to those looking to refinance their home.

In addition to those incentives, Box said a variety of government loans have made it easier than ever to enter the housing market.

“We’re seeing more government lending because they’ve let us go to 100 percent financing,” he said. “It’s just important that your credit score be great to get the best type of loan.”

In addition to having a good credit score, there are also factors to consider when applying for a home loan, including Private Mortgage Insurance (PMI). Box said more loan institutions are relying on the insurance as loan defaults increase. A PMI policy covers the lender in the event that a borrower has to be foreclosed on.

Box offered an overview of the different kind of loans that are available to buyers:

• USDA loans: These loans, funded by the United States Department of Agriculture, may be available for buyers looking north of Gardendale. Box said more rural communities like Mt. Olive, Smoke Rise, Warrior, Kimberly and Morris are far enough away from Birmingham to be eligible for the loans. This loan offers 100 percent financing with no PMI, though there are some limitations and restrictions with the loan based on income and the number of persons who will reside in the house.

• FHA loans: This type of loan does not require a perfect credit score, but it does require a 30-year PMI and an up-front mortgage premium. However, Box said buyers who can make a 20 percent down payment on a house may want to consider conventional loans. “There’s more flexibility with this loan and there’s no geographic restrictions,” Box said.

• VA loans: Veterans Administration loans are available for active-duty and retired military personnel. One-hundred percent financing is available with no PMI required. Box said in some cases, the loans may be available for those in the National Guard.

• Conventional loans: Unlike government loans, conventional lending requires a near-perfect credit score and the ability to make a down payment. “A buyer shouldn’t rule this type of loan out because the rates may be a little bit better,” Box said. “But if there’s any blemishes on your credit, you need to consider a government-type product.” He said depending on the down payment, a borrower may not need PMI.

Box said anyone considering buying a home should always contact a reputable lending professional first.