A house is a place where people live in peace and comfort with their family. A house can be big or small according to the size of the family. Houses are quite expensive not only because of the materials and equipment spend in building the house but the taxes and overall price of in the property market. The houses located in busy and developed areas have more purchase price as compared to houses made in underdeveloped or reserved areas of the city.
There are many wishes that a person has when he grows up, such as having a good job, driving a nice sporty car, and owning a comfortable home. Of all the wishes, buying a house is the most expensive and requires a substantial amount of financial resources. An aspiring homebuyer with financial constraints and moderate-income has to rely on different home loans, which can help and assist people in buying a house. The home loans are called mortgage and an agreement where the homebuyer (borrower) agrees to pay the principal and interest amount to the lender in a specified period.
Real estate is very expensive, and many potential homebuyers do not have sufficient cash savings to buy a house. In a mortgage, a potential homebuyer has to pay 20% or 25% down payment and borrow the rest of the money. There is two option that a person has are conventional loans offered by banks and private lending companies and government-backed loans given by approved lenders. There are a few things a person need to consider while knowing which option to choose. The qualification factors or criteria of mortgage includes
• Credit score
• Debt to income ratio
• Monthly income of the person
• The amount of down payment
• The interest rates applicable to the loan amount
A homebuyer has different types of a mortgage loan at his disposal. The different types of mortgage loans are
Fixed rate mortgages
The simplest and most common type of home loan offered by mortgage companies near me is ‘fixed rate mortgage.’ A person will make the same mortgage payment for the entire term of the loan. The common mortgage term for fixed-rate mortgages is 15 and 30 years. A person can himself calculate the mortgage payments by himself; this can help a person compare the different rates offered by lenders and then decide which lender to choose for a mortgage loan.
Adjustable rate mortgages
The adjustable-rate mortgages are similar to standard loans, but the main difference is that the interest rate change at some point during the mortgage term. When the interest rate increase, the monthly mortgage will increase, and when the interest rate decreases the scheduled mortgage payment will also decrease.
Interest only loans
The person will pay only the interest amount on loan each month. A person will have to pay a smaller monthly payment as he is not paying any loan balance. The drawback of interest rate loans is that a person is not paying the debt that he owes and instead of building the equity on the home, but a person has to repay the debt.
The refinance loans allow a person to change one mortgage with another if he can find a better loan term. The refinancing means that a person can pay off the old loan with the new loan. The refinance loans have higher closing cost.
The mortgage loans offered by banks and private lenders require stringent rules and strict documentation. The monthly income and credit scores of the person are prime factors in the acceptance or rejection of the loan. The credit scores are determined by FICO (Fair Isaac Corporation) and range from 300 to 850. The banks only require good credit score as a there is a chance that a person will be poor, or bad credit score will default on the loan amount. The second crucial factor is a debt to income ratio, which means the amount of a person’s income that will be used to pay the debt he owes. A high debt ratio is often rejected in the most loan application, and a person needs to have a low debt ratio.
The best thing that aspiring homebuyers who fail to qualify for conventional loans are to obtain the government-backed loans such as Federal Housing Administration (FHA) loans, Veteran Affairs (VA) loans, and United States Department of Agriculture (USDA) loans.
The FHA loans are the most popular loans for first-time homebuyers who have either a poor or bad credit score. The FHA loans only ask for 3.5% down payment on poor credit score and a 10% down payment on bad credit score. The VA loans, on the other hand, are best home loans for war veterans, their spouses, and actively serving military men. The VA loans do not ask for any down payment or mortgage insurance. The closing costs and interest rates are also less in VA loans as compared to other home loans.
Hilda Peter writes in the popular online magazine on the real estate property. She puts his reviews and gives valuable information to people, which help them to buy a home. She recently wrote on mortgage companies near me. People can follow her on Facebook and Twitter.