Buying a home is one of the most important financial decisions someone can make. After many years of keeping their credit score up to par, many can qualify for a loan to purchase the house. There are many different types of home loans, so it is very smart to do a little research before committing one.
First of all, credit score is an important indicator of what type of loan that you will be able to secure. Having a high credit score can enable you to get a lower interest rate or a higher loan amount. A lower credit score can seriously impact both your interest rate and the amount of money that you will be able to borrow.
Another key element in regards to financing a home is job stability. Generally, the longer that you have been in a job the more stable you are considered to be. Mortgage companies and banks will often require a person that is applying for a home loan to show paycheck stubs, bank account statements and tax information such as W-2's in order to guarantee income.
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.
If there is no down payment, sometimes banks will allow borrowers to secure two different loans to cover the principal amount that is needed. The second mortgage will generally have a higher interest rate than the first mortgage and the terms for the second mortgage will be shorter than the standard 30 year time span. Many people will owe what is called a balloon payment at the end of the second mortgage's term, and most lenders will let borrowers refinance the remaining amount.
There are a couple other types of loans that are frequently offered to buyers. One of them is known as an Adjustable rate mortgage which has an interest rate that fluctuates with the market. It causes the mortgage payment to vary each month. Another offer that most banks and lenders are known as an interest only loans. This is when the buyer pays only on the interest for a contracted amount of time. After that period of time, they are paying on the home.
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. - 29971
First of all, credit score is an important indicator of what type of loan that you will be able to secure. Having a high credit score can enable you to get a lower interest rate or a higher loan amount. A lower credit score can seriously impact both your interest rate and the amount of money that you will be able to borrow.
Another key element in regards to financing a home is job stability. Generally, the longer that you have been in a job the more stable you are considered to be. Mortgage companies and banks will often require a person that is applying for a home loan to show paycheck stubs, bank account statements and tax information such as W-2's in order to guarantee income.
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.
If there is no down payment, sometimes banks will allow borrowers to secure two different loans to cover the principal amount that is needed. The second mortgage will generally have a higher interest rate than the first mortgage and the terms for the second mortgage will be shorter than the standard 30 year time span. Many people will owe what is called a balloon payment at the end of the second mortgage's term, and most lenders will let borrowers refinance the remaining amount.
There are a couple other types of loans that are frequently offered to buyers. One of them is known as an Adjustable rate mortgage which has an interest rate that fluctuates with the market. It causes the mortgage payment to vary each month. Another offer that most banks and lenders are known as an interest only loans. This is when the buyer pays only on the interest for a contracted amount of time. After that period of time, they are paying on the home.
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. - 29971
About the Author:
Graham McKenzie is the content coordinator for a leading South African leading Homeloan and Bond Origination portal which provides access to Standard Bank Homeloan.
