United States approves two types of home mortgage
loans. First, is the FHA mortgage. These are insured
by the federal housing administration and give
mortgage loan to people who have a poor credit
history or low/moderate income or those who can
afford a large cash down payment and closing cost.
The other type of mortgage loan offered in United
States is VA mortgage. The department of veteran’s
affair insures these loans. It is for veterans,
reservist and active duty service members. They
too offer loans with flexible credit guidelines
and expanded qualifying ratios.
There are various mortgage loans, which are offered
by banks and other lending institutions. Therefore,
a person should select and apply for an appropriate
loan depending on the loan characteristics and
the requirement of the borrower. Various factors
like his current financial status and future financial
prospects, and the term, which he wishes to stay
in the home, decide which loan a borrower should
opt for.
If a person wishes to stay in the home mortgaged
for the entire term until which he pays off the
loan, he should go for fixed rate mortgage (30,
15 and 10 years). In this the interest rate and
monthly payment remains the same for a fixed term
of the loan.
The other type is the adjustable rate mortgage
loan. In this, the rate of the interest and monthly
payment remains the same for a fixed tenure but
is readjusted for the rest amount and the tenure.
It is for those who wish to move after a fixed
period or could accept later changes in their
payments. The loans offered under this head are
10/1 year adjustable rate mortgage, 7/1 ARM, 5/25
ARM, 1 yr ARM.
The other is balloon mortgage loan. In this the
interest rate and monthly payment remains the
same for a fixed time and at the end of the term,
the loan due amount is paid in full. It is for
those who are willing to refinance at prevailing
market rates. Therefore, annual percentage rate
and term of the loans are the two criteria, which
is considered while applying for mortgage loan.
Owning a home ascertains a certain pride and
dignity to a person. Home ownership is an individual’s
dream come true. Additionally, it is one of the
most stable investments and have various intangible
benefits attached to it. There are various benefits,
which should be considered while buying a home.
Firstly, it should help you building equity of
your home. The more is the equity of your home;
more will be its market value. Second, the mortgage
payments should be such so as to provide substantial
tax deductions. Lastly, the real estate option
is the safest option.
Today, there are innumerable banks and lending
institutions that provide home mortgage loans
across United States. They are available through
many channels like traditional one to one meetings,
telephone, via internet. Internet is the most
popular medium and one can apply for a loan on
net with just a click. You need to provide some
details regarding the personal information and
financial status. The borrower of a home mortgage
should shop excessively and compare the interest
rates offered by different lenders. Devote some
time on this and so later, you do not have to
worry.
There are various factors that a lender considers
while offering a loan. The credit history and
the credit score plays an important role in determining
the rate of interest offered. Low credit score
is usually due to late payments, outstanding debts,
unclear credit payments or a bankrupt situation
in the past. The rate of interest is comparatively
higher on the poor credit score than the individual
with a good credit history.
Applying for a loan not only relieves an individual
from current financial difficulties but also gives
him a chance of improving his credit history.
In case of home mortgage loans, it helps an individual
to make his dream come true of owning a home with
the financial assistance that it offers. However,
it gives a financial relief in the present situation;
it should be carefully applied keeping the individual’s
future status in mind.
Due to the increasing competition, according
to economist Freddie Mac, average home mortgage
loan rates across the U.S fell recently by a few
percentage points from 5.83% to 5.75% for 30 year
fixed rate mortgages and from 5.22% to 5.13% for
15 year fixed rate mortgages.
Back
