Your home is likely the biggest purchase we will ever make and the biggest asset – or liability – we will ever have. Traditionally, a home was often thought of as an asset, but with the economic downturn, in many cases owning a home has turned into a liability. When housing prices started to drop and relatively new homeowners realized that it was only a matter of time before their adjustable rate mortgages would skyrocket.
With rising balloon payments many homeowners were poised on the precipice of going underwater. Many homeowners needed to modify or refinance their loans in order to stay in their homes. At the same time, new homebuyers saw the dropping real estate prices as an opportunity to get into the market. Either way, it’s important to learn all that you can about different ways to finance a home before you take the plunge.
Whatever your circumstances, you need to learn all that you can about the options available to you. These days there are many avenues to get the most information and thorough research about your possible home loan situation. The internet is a wealth of information, while there are many reputable mortgage brokers that offer their services for consultation. Whether you’re applying for a home loan for a new home, a refinance loan, an equity loan, a HELOC, or a reverse loan, you should be aware of what each loan entails.
Buying a New Home
Most people don’t have full cash up front when buying a house. They need to get approved for a home loan through a lender. The first step before applying for a loan is to determine how much of a loan you can afford to take out. You will need to calculate your monthly payments and shop the current interest rates to figure out if the monthly payments fit within your budget. Once you figure out how much you can afford, you can shop within your price range.
Determine your credit score
Your credit score affects several factors in your home loan. It may affect your credit rate as well as your ability to get the best loans. Some lenders may chose not to work with someone with a low credit score.
Don’t be afraid to look outside the box. While it is more difficult to get a non-conventional loans these days, it’s still possible. You can research loans that don’t require large down payments or no down payments. Often the government may have some special programs for home loans. There are a variety of options that are available if conventional loans are not the right fit for your situation.
If you already own a home, you may be looking into refinancing your home loan. Interest rates are at an all time low, and if you got a loan several years back, you are likely paying a higher interest rate. Refinancing is a really great way to lower your monthly payments and help you out in a tight financial spot.
If you plan to refinance your home, there are several options. Refinancing is a method of re-evaluating the terms, payments and interest of your loan. It’s a good way for borrowers to modify the terms of their loans to get lower payments or you can refinance to take some equity out of your home.
Another option for leveraging your home equity is get a home equity line of credit or a second mortgage. These are essentially loans that are secured by your home. However, you should be aware that many of these kinds of loans have higher interest rates or variable interest rates.
Now that you are armed with many options for obtaining a home loan or refinancing your mortgage, check with lender or mortgage broker to find out what plan will work best for you.