Home loans are simple right? After all, it's just a loan secured by a mortgage against a house. Many people go into the home buying market with very little understanding of the many different types of home loans out there.
For instance, many people don't really understand the very
first thing about looking for a loan. What's the very first
thing? Is it the interest rates, or the size of the down
payment, or the equity required? Nope, the very first thing you
need to understand is the marketing and sales industry that
surrounds this whole area of money lending.
For instance, do you know the difference between a loan broker,
a loan originator, and a direct lender? Did you know there can
be a really huge difference in the cost of a loan depending on
where it comes from and how many middle-men get their take?
A loan broker is similar to a real estate agent. The agent
doesn't own any houses for sale. They simply have developed
methods of finding houses that are for sale and helping you
narrow down your search. Same with a loan broker; he doesn't
have any money to loan, and doesn't even buy and sell debt, he
simply acts as an agent to help put you together with a lender
-- and he will charge you for his services.
The next step up the food chain in the business of lending money
for houses is the "loan originator". This is a company that does
lend money, but only for a very short time. These lenders simply
create new loans, and then "sell" the loans to large banks.
Here, as with the broker, you have to pay the loan originator
for their time, either through increased closing costs or
through a slightly higher rate than you might get from a direct
lender. The highest volume loan originators manage to get pretty
good deals from the banks they sell their "paper" to, so often
you can still do pretty well going directly to a loan
originator.
The top of the food chain in this arena is the direct lender.
This is company like a bank or investment company that has real
loot. They have money from investors or money from savings
accounts and Certificates of Deposit, and they need something
relatively safe to do with this money to make more money with
it. These direct lenders will often ultimately be your best
deal, though they are harder to find than the other people in
the industry.
So the first thing you need to do is learn a little bit about
the marketing and sales of home loans in order to find the right
type of company to do business with.
New Home Loans
By Derek Farley
One of the first things you should do before applying for new home loans is to go over your income and monthly bills or expenses. This way you'll know the amount of a loan you can afford and keep from going into debt. Make sure you take into consideration that you'll also be paying for homeowners insurance after you buy a home. Furthermore, you need to take into account the down payment and loan closing costs. Check your credit report before you apply for a loan to ensure you have good credit. Try to straighten out any credit that isn't good to boost your credit score.
It may be a good idea to get a mortgage loan before you choose the home you want to buy. When you lock in an interest rate, you won't have to wait for a long time once you find the home you want. Another benefit of pre-qualifying for new home loans is than you can look at only the homes you know you can afford. It's very important to find out everything about the new home loans process before you apply. Always ask the agent or loan officer questions if you don't understand something.
Investigate all the options of new home loans so you understand all the pros and cons. The amount of your down payment can depend on what company you using. Private mortgage insurance companies or FHA and VA can make your down payments low. Fixed rate and adjustable rate are different types of mortgage loans. The interest rate stays the same with a fixed rate mortgage loan. The interest rate for an adjustable rate will be lower than a fixed rate but only for the introductory period. The drawback is you don't know how high it will eventually be raised. An escrow agent will evaluate your loan documents after they are approved. An appointment will be made for you to sign for the loan.