A Guide to Home Mortgage Loans

Purchasing a home is biggest decisions in a person’s life and selecting the right home is just as essential as choosing the right mortgage. Lenders offer a wide variety of loan packages to fit just about anyone. There are many details to consider before buying a home loan, so don’t jump into the buying process without doing your homework first. Setting aside a down payment is just one of the first steps you’ll need to take.

Conventional Fixed Rate Mortgages

Conventional fixed rate mortgages are harder to qualify for because these loans are fixed for the entire term of the loan. Your rate is locked in, and you don’t have to worry about sudden changes in your payment. Many people prefer to go with a fixed rate mortgage because there are no surprises. Choose a fixed rate if you want to stay in your home for the entire term of the loan or if you just want to feel more secure about your mortgage. These loans are best for people who don’t plan on moving, but some people like to get approved for a fixed rate just because they qualify for one. Of course, you are not required to stay in your home. You can always sell or rent the home, regardless of the type of loan you choose.

Adjustable Rate Mortgages

Adjustable rate mortgages are some of the most common types of loans because these loans are easier to qualify for when compared to conventional mortgages. The adjustable rate mortgage is often referred to as an ARM loan. The loan usually has a fixed rate period for the first two years, and then the rate adjusts each year. The new rate is based on the current market interest rates. Some adjustable rate mortgages have balloon payments built into the loan, so it’s vital that you know what you are getting into. Some people with poor credit may only qualify for an adjustable loan. Refinancing can be an option later on for people who still need to work on their credit.

FHA and VA Mortgages

Consumers can also choose an FHA mortgage. These loans are designed for people who may not normally qualify for a home loan because of credit history or because they don’t have a down payment. FHA mortgages are often adjustable, but the rates are generally lower than standard adjustable rate mortgages. Some fixed FHA loans may be available for those who qualify. Criteria can vary greatly, so talk to a loan officer for more information. VA loans are similar to FHA loans. A VA loan is a guaranteed loan for eligible veterans, active duty soldiers and surviving spouses.

Factors to Consider

There are many factors to consider before buying a home. The type of mortgage you choose can affect you and your family for many years. Some lenders require a sizable down payment to get into a home. Always review what you can afford, and set up safety nets just in case your income changes overnight. Additional savings, investments and certain types of insurance plans can protect you. Planning ahead can help you keep your house from the life of the loan.

Factor in all of your expenses such as home owners insurance, property taxes, utilities and any regular maintenance costs. Air conditioning units, furnaces and fire places all need maintenance. Home owners insurance covers the structure and sometimes the belongings in the home, but this type of insurance usually doesn’t cover floods. You’ll need to buy an additional policy to protect your home, in case of a flood.

Talk to your loan officer about how you can make your credit even better before you try to qualify for your home. A higher credit score can really make a difference in your interest rate and monthly payments. You always have the right to dispute anything on your credit report. Get a copy of your credit report and dispute old or inaccurate information. Send letters to all three credit bureaus and wait two months to see how your credit improves.

Ask your lender or mortgage broker about yield spread premium. Yield spread premium can cost you extra money because it adds points to the back of the loan and some buyers don’t even know they are paying these charges. The points make your interest rate go up. Ask your mortgage broker if you can pay a higher free upfront, instead of getting a higher interest rate. Your final loan documents must disclose whether you are paying yield spread premium or not. Read these documents very carefully and take your time before you sign anything. It’s vital that you understand all charges and fees before committing yourself to a 30-year mortgage.

Understand all the benefits and risks that come with your loan. Some loans are very simple, while other packages include a lot of details that can be hard to understand. Know when, and if your interest rate might change or if it’s locked in for the life of the loan. Check to make sure you don’t have a balloon payment due at the end of the also. Don’t be afraid to ask questions if you are unsure about anything.

State of California: Consumer Home Mortgage Information: This site includes a heap of information about buying a home in California.

HUD: Buying a Home: This website includes a detailed list of commonly asked questions about buying a home.

The Federal Reserve: Consumer Help This site includes tips, and information about shopping for a home mortgage.

Data Place: Home Mortgage Disclosure Act Data This site is a guide to the home mortgage disclosure act.

Arizona Attorney General: This website has information about mortgage settlements and information for homeowners who need loan modifications.

Freddie Mac: Mortgage Guide This site goes into detail about what you need to be aware of before buying a home loan. Know about rates, inspections and everything that has to do with mortgages.

Washington State Department of Financial Institutions: This site includes information about buying a home and preventing foreclosure.

Federal Trade Commission: Mortgage Discrimination: This website goes into detail about the mortgage discrimination act. Everyone is entitled to equal treatment, especially when it comes to buying a home.

Federal Reserve Board: Adjustable Rate Mortgages: This site is a consumer handbook about the pros and cons of adjustable rates mortgages.

Ginnie Mae: A Guide to Owning Your Own Home: This site features a simple guide about owning your own home. It has a mortgage calculator and a few other useful tools also.

USA: Borrowers Guide to Home Loans This site is full of information about getting the best loan, warning signs of a bad loan, comparing lenders and more.

National Association of Insurance Commissioners: This site is a detailed guide about home owner’s insurance.

Minnesota Housing: Current Interest Rates: This site includes details about interest rates in Minnesota.

New York State: Homes and Community Renewal: This website features information about current interest rates for 30-year mortgages.

IRS: This site features information about mortgage interest and types of mortgages.

Yale: This site includes information about house prices, interest rates, and issues with the mortgage market.

United States Department of Veterans Affairs: This site includes a detailed list of loan contact information for veterans.

Financial Crimes Enforcement Center: Information about mortgage loan fraud and other financial crimes.

Pen Fed: Mortgage Overview: This site has a detailed chart that displays information adjustable rate mortgages and other types of loans.

Colorado Attorney General: This site has a consumer guide to multi-state foreclosure settlements.

UCLA: This site has information about home loans offered through universities.

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