A Primer for First Time Home Loans

admin — Tue, 23 Sep 2008 17:54:33 +0000

What are Home Loans?

Home loans are used to finance a home purchase and are also known as mortgages. There are many varieties and they can be tailored to suit the needs of the home buyer.

What is a mortgage?

A mortgage is quite simply a loan taken to buy a home. There are many types of mortgages and these loans are also called secured loans because the home itself serves as collateral and “secures” the loan. Most mortgages require you to put some amount of money on the home as a down payment and this amount can vary. Typical down payment amounts are 10-20% of the home value, but mortgages are available for $0 down, especially for first time home buyers.

Where to find Home Loans?

There are many lenders that offer home loans, from banks to credit unions and you can even get mortgages online now. If you’re looking for first time home loans you may want to start with the bank where you have your checking and/or savings accounts as they may offer discounts for established customers. Online mortgage brokers are also a good place to look as it is easy to find them and also easy to get a quote.

Determining eligibility for a Home Loan?

There are several factors that a lender will use to determine your eligibility for a first time home loan, however the most important of these is your credit score. Your credit score is the number assigned to your credit rating by the three big credit reporting agencies, Trans Union, Experian and Equifax, and the higher this number is the better. Your credit score is influenced by the number of loans you have and your repayment history among other things.

How are home loans paid?

A home loan is usually a very long term commitment, the typical mortgage is taken out for 30 years. This is because the loan amounts are so large that shorter terms would make the monthly payments unbearable for most working people. Home loans are usually paid on a monthly schedule although it is possible to get mortgages that are paid every two weeks. The benefit here is that the borrower ends up paying less interest with this type of repayment schedule and in many cases can pay the home loan off in as little as 10 years.

When should I get a Home Loan?

Basically, you’ll need a first time home loan whenever you decide to purchase a home. The best time to do this is really up to you. Can you afford the down payment and monthly obligation? Are you planning on staying in the same area for longer than the next 5 years? These are both important questions that can affect whether or not the time is right for you to get a first time home loan.

You also want to consider the current interest rates being charged. If rates are high it may make more sense for you to wait. Also think about your credit score. If your score is low it can also make sense to wait. The benefit of waiting is you can save more money for the down payment and can also get a decreased interest rate, saving you money in the long run. First time home loans are typically easy to get, even for those with poor credit and the biggest benefit is that you become a home owner.

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A Primer for First Time Home Loans