Home loans exposed
2007-04-20
If you’re interested in getting a home loan in order to purchase a house then you’ll see that it will prove more difficult than you’ve thought initially. Among the several problems the first time homebuyers will encounter, by far the most important will be which home loan product to choose. However, in order to do this the first time homebuyer will need to understand all the different home loan products and the specific terminology. Even if you have some experience in this particular field, you may find yourself set back a bit thanks to the large number of home loan options available today.It is important for the first time homebuyer to understand all the types of loans so that he will be able to decide between a thirty-year fixed rate home loan or a fifteen-year fixed rate loan, or between an interest only home loan or a negative amortization home loan. And you need to start using a loan calculator.
As a first time homebuyer you must seriously study and understand all of the options available to you in order to compare the pros and cons of all of them. And don’t forget that after you’ve decided on a type of home loan, you’ll have to take into consideration things such as rates, points, escrow, amortization, simple and compound interest, future and present value.
Trouble will follow you if you start getting your financing in the same time that you are shopping for a house. Learning all the real estate terminology and concepts and looking for a house in the same time will tend to overload your brain, and you will make mistakes. And mistakes in this area will probably end up costing you hundreds if not even thousands of dollars in both the short term and long run, and you’ll only figure it out well after it will already be too late.
The way to avoid making such mistakes would be to get informed about the home loan products and the real estate market in general. You’ll be glad to know that the Housing And Urban Development HUD will provide you with all the information you may need in order to understand the details of home buying and mortgage borrowing.
You’ll also find a fountain of knowledge at your local bank or any good mortgage company. Their loan officers work with these loans every day and know all their ins and outs. They will gladly talk to you since they might end up getting your business if you choose to borrow from their company. You should always scout around for the best deals, so do a bit of shopping around at several mortgage lenders in order to make an educated choice. A loan cost calculator will help you in making this decision.
You should definitely avoid any kind of gimmick home loan product. The traditional thirty-year fixed rate home loan may prove the perfect choice for you also, as it has for most people.
You should know that there is no clear benefit of a fifteen-year fixed rate home loan over a thirty-year fixed rate home loan except that the fifteen-year fixed rate loan straps a higher monthly payment on your back. Sure you can pay your home loan off much quicker with the fifteen-year option, but if anything happens to your income during this period you’ll be stuck with a high monthly payment. The thirty-year fixed rate home loan will allow you to pay your loan off earlier if you make one or two additional principal payments per year, and in the event of something happening to your income you’ll have a lower monthly payment than with the fifteen-year loan.
For even more help, a whole collection of mortgage calculators is at your disposal on mortgagesum.com
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