[This is a guest post by T. Williams. Think you’ve got what it takes to be a guest poster? Contact Em at em [at] blondeandbalanced [dot] com to learn more about becoming a guest poster yourself!]
Obtaining a home loan is a process that many people have little experience with, leading them to make mistakes that can cost them a great deal of money. Although some guidance can be obtained from the lender as you are going through the process of obtaining the loan, it is best not to rely on the lender’s advice alone.
Here are some tips that will help you get the best home loan for your current financial situation, allowing you to buy the home you desire without paying more than necessary. (Keep in mind that you still need to budget for things outside of your mortgage, such as maintenance and repairs, homeowner’s association fees, home and content insurance, and a number of other things.)
Read And Understand All Of The Terms Of The Loan
Many people make the mistake of signing up for a home loan they don’t understand, trusting that the lender has their best interests at heart. They fail to realize that the lender is going to try to do what is best for the business, not necessarily what will save the borrower the most money. It’s important for you to educate yourself on the different loan types and features so that you can make an informed decision about which loan product to choose. There are many people facing foreclosure today because they took out a home loan with terms they did not understand, not realizing how the loan would affect them financially in the future.
Choose A Traditional Loan Product
Over the past decade, many exotic home loan products have been created to appeal to niche borrowers who may or may not actually benefit from the terms of these products. Exotic home loans are designed to satisfy certain financial requirements and may have uncommon loan terms that must be fulfilled for the loan to remain in good standing. Because these home loans can have several traps for the unwary, many first time home buyers prefer to obtain traditional home loans. Traditional loans often have fixed interest rates for the life of the loan and generous repayment terms that allow you to pay a reasonable amount over a significant period of time in order to pay off your home.
Examine The Interest Rate Carefully
One of the most important details to pay attention to when attempting to obtain a home loan is the interest rate that will be charged for that loan. A number of different factors may be used to determine the interest rate you are charged by the lender for your home loan. A large part of the calculation will be your credit score and your credit history, with a high credit score and good credit history resulting in a lower interest rate. The lender your loan is being obtained from will also affect the interest rate of the loan, but the lender offering the lowest interest rate may not be the best lender to obtain the loan from. You should take all factors into consideration when choosing the best home loan for your needs.
photo credit: nikcname