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A Closer Look: Home Loans |
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Written by GrahamMcKenzie
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Tuesday, 08 December 2009 |
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Purchasing a home is a decision that can lead to financial security. However, financing is often a confusing process especially for first time home buyers. Obtaining information on the different types of home loans is one of the most important steps to getting started in the home buying process. There are many different types of products available.
by GrahamMcKenzie
Purchasing a home is a decision that can lead to financial security. However, financing is often a confusing process especially for first time home buyers. Obtaining information on the different types of home loans is one of the most important steps to getting started in the home buying process. There are many different types of products available.
Before going to a bank or mortgage broker, it is very important that you know your credit score. The better the score, the greater your chances are to not just getting a loan, but for getting a loan with a lower interest rate. In the end, when you keep your credit score in tip top shape, you can actually save money when you purchase a home.
Job stability is another item that lenders look at. Steady employment with verifiable income is an important factor in the eyes of most lenders. Often lenders will require bank account statements, paycheck stubs and W-2's before they will approve someone for a home loan.
Having a down payment would also be ideal. A large down payment could keep you from paying PMI, or private mortgage insurance. It can mean a lower house payment. However, if your credit score is high enough and you have steady employment there might be other ways to buy a home without having to pay PMI.
Some borrowers will often have a balloon payment at the end of the mortgage contract. Most of the time, the lenders will allow the balloon payment to be refinanced and paid over an agreed amount of time.
Of course, there are other options available to prospective buyers as well. Adjustable rate mortgages (ARMs) have interest rates that vary each month according to market trends, this means that the mortgage payment will vary. Another option is an interest only loan, in which the buyer only pays interest on the loan for a specified period of time and then starts paying on the principal at a later date, when they are making more money.
Overall, home loans can be somewhat confusing, especially for first time buyers. It is a good idea to know your credit score and to have a strong grasp of your current financial situation. Talking to a few different lenders and researching your options is a good place to start.
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