Discover an Array of Home Mortgage Loan Options
When making a large financial investment such as buying a home, you need to be aware of the various types of home loans available to you. If you are a borrower with good credit, consider a home equity loan, home equity line of credit or a traditional home mortgage. If your credit is less than perfect, you can look into bad credit home loans. Additionally, there are Veterans Association (VA) home loans specifically offered to veterans and Federal Housing Administration (FHA) home loans offered to low-income individuals or families.
Home Equity Loans
Home equity loans allow you to borrow money by pledging your home as collateral against the loan. Lenders see home equity loans as a safe form of financing since borrowers put their home on the line in exchange for the loan. Mortgage lenders recognize that borrowers are more apt to make payments with their home at risk and, if a borrower fails to make a payment, the lender has the legal right to collect their property and sell it to pay off the loan.
The best way to find a home equity loan is to shop around at a variety of financial institutions, including banks and credit unions. You can also get personal recommendations from friends and family who have taken out a home equity loan in the past in order to get detailed information about lenders they may have worked with. The Internet is another valuable resource for you to take advantage of. You can use the Internet to compare rates and find reviews of different home loan lenders in your area.
Home Mortgage Loans
Home mortgages are loans you can take out to pay for a home and its surrounding property. Similar to the home equity loan, a home mortgage uses your home as collateral on the loan and missing payments may result in your home being taken away. These loans are typically financed for a term between fifteen and thirty years.
Your monthly payment comprises of the principal, taxes, insurance, and interest. The principal you pay is the amount you borrowed to purchase the home. The interest, the bulk of your payments for the majority of the term, is based on current economic indicators.
Home Equity Line of Credit
A home equity line of credit works similarly to credit cards, except that you are using your home as collateral. Your available limit in a home equity line of credit is determined by subtracting the amount owed on the mortgage by the standard 80% of the home’s current value.
Once the loan amount is determined, there is a span of five to ten years in which you will be able to take out money and make monthly payments. During the repayment period, you will not be able to make withdrawals. Instead, you will pay back the borrowed amount, with interest. If you do not pay back the balance, you run the risk of losing your home through forced foreclosure.
Bad Credit Home Loans
If you are concerned about your creditworthiness holding you back from purchasing a home, you can opt for a bad credit home loan. These loans come with higher mortgage payments since the lender deems you as a high-risk borrower due to your past credit history. Although your interest rates, fees, and initial deposit will be higher than those with good credit, this loan will allow you the opportunity to rebuild your credit rating.
VA Home Loans
A Veterans Association (VA) home loan allows you to attain a loan with no down payment. With this loan, you will be able to buy a personal residence within the United States and its territories, whether it is a single-family home or a townhouse. Although there is no set maximum amount you can borrow or private mortgage insurance offered, you will need to pay a funding fee of two percent of the loan amount.
In order to qualify for the VA home loan, you must be on active duty or have a discharge with either 180 active days between September 16, 1940 and September 7, 1980; 90 days of service during a war; or six years of service in the National Guard.
FHA Home Loans
Federal Housing Administration (FHA) home loans are primarily used by lower income families to purchase a home with low down payments. Down payments are generally 3% of the home value compared to the average 15% down payments. The FHA home loan acts as insurance to the lender so the borrower’s risk factor is lowered.
In order to qualify for a FHA home loan, you need to have a positive credit history and be bankruptcy-free for two years, have a steady income and employment record, and make sure your monthly payments fall below 30% of your gross monthly income.
Whether you have good credit or bad credit, are a veteran, or are in a low-income bracket, there is a home loan out there for you. Be sure to thoroughly research the mortgage market and find the lender and the home loan best suited to you.