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If you have been working for years and paying out most of your money for rent, you should consider investing your hard-earned dollars in a home of your own! Homeownership can be accomplished through careful planning and good management of your credit.
Save For Down Payment
In the months before you apply for your home loan, you should begin saving for a down payment. Your home loan stands a greater chance of approval if you have some money (preferably ten percent or more) to pay down. This may be a bit harder if the home you are looking at is quite expensive - but for starter homes that you might live in for ten years or so, around $5,000 is typically a sufficient down payment for most lenders.
Also, when you are near to the date that you plan to put in your application for your home loan, avoid making applications for new credit. It is a good idea to avoid all credit applications entirely for six months before applying. Repeated attempts on your behalf to obtain credit makes you look like you are reckless with your credit, and can actually cause you to get denied for your home loan.
Fixed Or Adjustable Rate Home Loan?
When shopping for home loan lenders, look for those who offer the lowest interest rates. A difference of just a percentage point or two can add thousands to your home loan over the years. If the home you are buying is your dream home that you plan to live in until you are very old - go for a fixed rate home loan. A fixed rate home loan will allow you to have predictable payments and interest for the entire life of the loan.
On the other hand, if you plan to be in the home just temporarily as is the case for starter homes for new families or those planning to relocate within ten years, you should go for an adjustable rate home loan that gives you an fixed rate for a certain period of time that is disclosed when you purchase the home, with rates adjusted periodically due to market conditions.
Additional Expenses To Plan For
Be aware of other expenses that may be involved with your home loan - such as closing costs, appraisal fees, and title searches. Some lenders will actually offer these services at reduced or no cost to win your business; others may share the expense and some may have you absorb all of these costs. Other costs might include application fees (usually non-refundable if you decide not to purchase), origination costs, and legal fees.
Additionally, some lenders will offer homeowner insurance that covers your property in the case of fire, flood, damage from wind, theft, and other maladies - right alongside your home loan payment. If the option of insurance is not available to you with your home loan payment - you will need to find an independent insurance agency to purchase insurance from to protect your investment.
You can typically find online home loan lenders who are more than willing to accept you as a borrower. Online lenders are very competitive, meaning that you might get lower rates and gentler repayment terms by getting your home loan online than you would if you choose to use a local bank. |
