The price of houses keeps rising across the US. Since most require a down payment that is more than a renter can afford, how do you become a home owner when you don’t have the savings to cover the down payment? The answer is a home mortgage to purchase your house.
A home mortgage is different from a home loan. A mortgage is a contact that is required for you to obtain a loan from a banking institution or lending company. The actual loan is the money the lender provides.
In recent years, the types of home mortgages available to the public have increased dramatically. I remember purchasing my first home when most loans required a twenty percent down payment. Today, loan terms and the rate status are different with home mortgages and is applied depending on the financial situation at the time of the loan. Some home mortgages offer better terms when the interest rates are low and others rise with high home mortgage rates.
With a fixed rate home mortgage, the interest rate remains the same for the duration of the loan. Therefore, your monthly payment remains the same, even when interest rates rise. This type of home mortgage usually extends for a term of 15 or 30 years.
The amortization period for 30-year fixed rate home mortgages is longer and the monthly payments are lower. Although you can borrow money on a long-term basis, it comes with a high interest bill and builds equity very slowly.
With a 15-year fixed rate home mortgage, the amortization period is shorter allowing equity to build quickly with interest bills much lower. Expect to pay higher monthly payments with this type of home mortgage loan period.
Adjustable rate home mortgages have lower interest rates. Keep in mind, this low interest rate is only for a short time. Usually after the first year, the new interest rate will rise or fall, depending on the movement of the lending company’s prime rate.
If you’re considering an adjustable rate home mortgage, make sure the interest rate is low enough to be an advantage. Your monthly payment will remain low when the interest rate is low, but when interest rates rise, you may be left with a monthly payment you are unable or unwilling to pay.
Once you’re in the home of your desire, your property begins to accumulate equity with the rise in home prices. If you find yourself in need of quick cash, you can always take out the equity with a home equity loan. The home mortgage rates for home equity loans have always been thought to be higher than the home mortgage rates of other loan types. If you plan to stay in the home for many years, this may be a good option for you, otherwise don’t sacrifice the equity unless you absolutely must.
Once you understand the types of home mortgages that are available, you will need to decide what you must have in your new home and what you consider as an “extra.” You’ll want to find the best interest rate, but you’ll also find that homes in your price range may not include everything you want. So be prepared to negotiate and willing to sacrifice if you find a great deal. Once you’re in your home, you can always upgrade in a few years, using the equity you’ve built up in your property.
By: Gail Anderson-Metcalf
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Understanding Home Mortgage Loans
April 29th, 2010Pre-Approved Bad Credit Home Loans
April 26th, 2010
Pre-approved bad credit home loans are home loans sanctioned to poor credit holders, on the basis of pre-approval. Getting pre-approved gives you an actual picture of the financial situation you are in and what your borrowing limit is. You can also form a clear idea of how much you’d have to pay every month if you borrowed as much as you want. This enables you to decide how much you can safely borrow and stay out of debt.
Pre-approval involves the process of submitting your financial information to your money lender before purchasing a home. Pre-approved bad credit home loans make the home buying procedure easy, saving money and time.
To obtain a pre-approved bad credit home loan, you should first submit a loan application to the lender mentioning your personal and financial needs. You also present copies of documents such as purchase agreement, tax returns, housing expenses, reason for poor credit, bankruptcy papers, and copies of credit reports. The lender verifies the application on the basis of your employment information, financial status, credit history, liabilities, and assets. After completing the application process, you will get a written document showing the amount, interest rate, and down payment according to the terms of the lender.
There are many lenders who specialize in pre-approved bad credit home loans. Depending on the lender, you are required to pay an up-front fee for processing, closing costs, and appraisal. Closing costs include title searches for deeds, processing documents, and legal fees.
Pre-approved bad credit home loans have numerous benefits. Once you are pre-approved, it gives you strong negotiating powers. The required time period for the pre-approval process varies from sixty to ninety days.
By: Steve Valentino
