Going in search of a mortgage loan can lead you into a very tangled thicket. There are literally scores of loan configurations and many of them are complicated beyond measure. There is fine print that it often takes a professional in the industry to understand, and explain. There are also plenty of misleading ads, online and on TV, promising large loans for minimal payments and leaving it up to you to find the traps.
For that reason, online sites such as this one can provide, if nothing else, a thorough education in mortgage loan basics. You can also elicit a selection of loan options through an online source and look them over at your leisure. When it’s time, you can seek an expert opinion on what is best for you, which is determined by an assortment of life situations and decisions that you probably have no idea should be involved.
You can also go through a mortgage broker, and count on that person to be your mentor and to find the mortgage that is the best deal for you. There is nothing like one-on-one communication, particularly when it comes to putting together something as complicated as a home purchase. But there is no substitute for self-education – that’s the purpose of this article, and many others like it on ExtLoansUSA, Inc.
Mortgage Loans and Credit
Your credit score is going to dictate the range of mortgage options that are open to you, and the level of interest rate for which you qualify. For that reason, it is imperative that you go into the process having reduced your debt to the extent possible and cleaned up your credit reports, which are used to calculate your credit score. Those credit reports are often inaccurate, most often containing outdated information. Look them over and make sure they are current.
Fixed Rate Mortgage Loans
If your credit score is high enough – at some institutions 700, at others 720 – then you will qualify for a fixed rate mortgage loan. That is the traditional standard loan, where you pay a fixed interest rate for the thirty year life of the loan. These loans are also often 80/20 loans, which means that the borrower is putting up a 20% down payment on the home. A twenty percent down payment also precludes the requirement of mortgage insurance, an additional cost required by the lender in NC. Since few of us have a hundred thousand in the bank set aside for a rainy day or a down payment, secondary loans known as “piggy back loans” have become popular. These are shorter term loans that are provided with an adjustable interest rate, meant to cover the gap between the cash you have and the cash you need to make that down payment.
Some lending institutions think that borrowers need to have a history in the home buying market in order to qualify for a fixed rate loan. However as the housing market continues to lose steam, competition may loosen this requirement among some of the lenders. If your credit is good and you are looking for financial continuity with an unchanging mortgage payment, the fixed rate mortgage loan is a good option.