Applying for a home loan? Here’s what you should know
Home loans or mortgage loans are either used by purchasers of real estate property with the intention to raise funds in order to buy real estate property. Here some of the questions that can help you get a clear picture about home loans.
What are things that you should keep in mind before choosing a home loan?
- If you are looking for home loans, you should first look for the best home loans quotes. This is possible only if you compare different types of such loans and get the best quotes.
- It is also essential to calculate the home loan beforehand to avoid any last minute hassles.
To compare home loans, these are some of the tips that you should keep handy:
- Always compare the prices of home loans – This is necessary to keep a track of the monthly EMIs that would be going from your pocket. If you do not compare different prices of the home loans, then your entire calculation can go wrong. Therefore, research and compare the best home loan prices so that you know exactly how much you will be paying.
- Research is the key – If you do not research enough about the home loan, then you can end up with the wrong home loan plan. There are a number of websites that help you with detailed information about home loans. You can read out the home loan plans and then choose the one that suits your specific preferences. It is important that a proper and thorough research is conducted to pick the best home loan plan.
What is the difference between fixed vs adjustable home loans?
When you decide to take up a loan to buy a real estate property, you would come across different types of home loans that are offered at fixed or adjustable rates. Let us get to know what are they and what is the basic difference.
- Fixed rate mortgage loans – These are those types of mortgage loans that have the same (fixed) interest rates through the entire repayment term. Due to the fixed rate, the monthly payment remains the same and does not change even for long-term financing options.
- Adjustable rate – Adjustable rate mortgage loans (ARM loans) are those types of home loans that have their interest rates changing from time to time. In the initial year of incurring the home loan, the interest rate of the ARM loans does not change. Due to this, it is also called a hybrid ARM loan.
What are the advantage and disadvantages of taking up fixed loans and adjustable rate mortgage loans?
Following are the differences between fixed rate and adjustable rate home loans:
- To begin with, ARM loans start with a lower rate of interest when compared with fixed type of loans. At the same time, it has an uncertainty of adjustment as the loan period progresses. The interest rates of adjustable mortgage rates increase in due time.
- When we talk about fixed rate mortgages, they maintain a stability in your payments; however, you end up paying for stability through higher interest rates as compared with the lower interest rates of ARM loans.
- Fixed rate mortgages offer the benefit of predictability, unlike ARM loans that have interest rates caps that limits the rate of change of interest.
What are government-insured home loans?
Government-insured home loans include the following:
- FHA loans – The Federal Housing Administration loans is a mortgage program that is managed by the HUD (Department of Housing and Urban Development).
- VA loans – The Department of Veteran Affairs offers loans to military veterans and their families. They are similar to FHA programs. The VA reimburses the lender in case the lender defaults the loan.