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Buying Soon? What You Need
to Know About Home Loans

home equity articles and tips

 

A house is usually one of the most significant financial investments a person will make during their lifetime. To purchase a home, you will need to take out a mortgage. Below are some things you need to know about home loans.

1. How Do You Get Approved?

To obtain a mortgage from a lender, you first need to be approved for the loan. There are many factors that go into this. Some of the most important ones are a person’s income status, the health of their credit and their ability to make a down payment. You will also be required to provide certain personal and financial documents.

2. Mortgage Rates

The mortgage rate is the interest charged on the loan by the lender. There are many factors that can determine the interest rate you are offered such as market indexes and the type of mortgage. If you want a good idea of the mortgage rates charged in your city, be sure to check with a few sources to get started.

3. Mortgage Payments

Mortgage payments are the monthly bills that are paid to the lender for the home loan. This includes interest payments, but it can include other expenses as well like hazard insurance, property taxes, warranties and more. Make sure you are aware of all costs involved.

4. Can You Use a Mortgage Program?

There are many government programs that are designed around the goal of helping families afford home financing. Many of these have subsidized mortgage rates. There are specific loans available specifically for seniors and veterans for example. Other popular choices are offered by the FHA and USDA.

5. Fixed Rate Mortgages

If you don’t use a mortgage program, you will probably end up choosing a conventional mortgage that is governed by rules set in place by the financial institutions Fannie Mae and Freddie Mac. One such option is a fixed rate mortgage. A fixed rate mortgage is a mortgage that has its interest rate set at the time the loan is created. It does not change.

6. Adjustable Rate Mortgages

On the other end of the spectrum are adjustable rate mortgages. Adjustable rate mortgages have an interest rate that may fluctuate up or down during the course of the loan based on changes in an index. These home loans are offered more often because they are less risky for the bank.

Overall, taking out a mortgage on a new house is a big step. Make sure you are fully educated on the subject to insure that you make the right decisions.

Informational credit to Cheviot Savings Bank.