Buying a home is a big step. In fact, it’s the most expensive purchase that most people will ever make. Unless you are fortunate enough to be able to pay cash for your new abode, you will soon become familiar with home loan lenders, mortgage loan interest rates and all of the necessary paperwork that is required to get your home loan approved. A mortgage loan, also known as a home loan, can be a lengthy process. If you want to minimize your time spent working with home loan lenders and start enjoying your home faster, it’s the perfect time to learn everything that you can about mortgage loans.
When most people purchase a new home, they either plan to live in it for many years or are purchasing it with the thought of later cashing in on the equity if the property value increases. In deciding which kind of home loan to apply for, you must first decide how long you plan to live in the home. A fixed rate mortgage loan is a popular choice among those who plan to live in a home for 10 years or more. As the name implies, this type of home loan offers the buyer a fixed rate over the entire life of the loan, which means the interest rate will never change.
An adjustable rate mortgage (ARM) is one in which the interest adjusts according to the current market rates. This type of home loan is popular for those who plan to sell in several years in order to cash in on rising property values. Interest-only loans, on the other hand, allow potential home buyers to make payments toward the loan’s interest for a specified amount of time.
In determining your eligibility for a mortgage loan, your credit report will be accessed so that the home loan lender can evaluate your creditworthiness. Today, the average American’s credit score is under 700, but even those with lower scores can be approved for a mortgage loan. The truth is that you don’t have to have excellent credit to obtain a home loan. In fact, more home loan lenders are granting bad credit loans to those who currently have the ability to repay or have shown improvement in their credit report. Even if you have a bankruptcy on your credit report, most home loan lenders will begin to consider your application after two years.
Before applying for a mortgage loan, it is recommended that you check your credit reports from each of the three major reporting bureaus, including TransUnion, Equifax and Experian. Inspect each entry carefully and make sure that all notations, including account numbers, balance, payment history and contact information are correct. If anything needs correction, file a dispute with the credit reporting agency and await their reply. When you apply for a home loan, your eligibility and interest rates will be determined by the information contained in your credit report, which is why it should be completely accurate when you are ready to submit a loan application.