Go in for a home loan if it really can help you purchase the biggest house possible at a repayment rate that you can afford. This is what a potential homeowner must do when seeking a home loan. It may sound very simple, but there are some other critical aspects of a home loan payment that you must consider:
- Principal and interest
- Homeowner’s insurance
- Property taxes
The state where you decide to purchase your house will also affect the rates of home loan.
Remember that when you are repaying a home loan, a part is used to repay the principal and the other goes towards interest payments. Hence, a longer loan period will mean that you will be paying more and more towards your principal. In the end, you can even end up paying double what the property is worth. All homeowners have to take insurance and the lender will collect the money required to pay this insurance premium. This will be added to your monthly home loan payments and can increase or decrease depending on the premium rates that the insurance company charges.
There is another type of insurance called ‘private mortgage insurance’ (PMI) which is meant to protect lender in case the borrower fails to pay the home loan installments. The PMI is directly related to the value of your property and the mortgage amount and it has to be paid by the lender along with the property taxes. The property tax is paid each month to the local government and your monthly loan payments can increase or decrease depending on the local taxes.
It is very important to know about all the costs before going for any home loan. Otherwise, these various costs can drastically increase your home loan amounts. One must be very careful in dealing with this. Just looking at a property and thinking you can afford it is not enough. A first time homeowner may not be aware of all these. If he opts for a home loan blindly without considering these options, he could end up losing his home because of defaults on payments.
Don’t get discouraged. With a little bit of thought and careful planning, you can get a good home loan for your needs. All you need to do is:
- Shop around
- Browse online
- Check local listings
Mortgage brokers, real estate dealers, banks, credit unions and several government housing development organizations all offer home loans. Hence, Make use of internet, get an idea about different schemes available and compare similar schemes.
You must compare interest rates, period of mortgage, fees and other terms and conditions to get the best home loan. All this can be done comfortably using internet. By browsing various websites, you not only compare more schemes but get detailed mortgage information. You also can find a mortgage calculator in the internet that helps you a lot in the mortgage calculation process. The anxious salesmen will not trouble you until you ask for a quote.
If you prefer to meet lenders face-to-face, then get a listing of all the local lenders in your area and visit their offices. Local lenders are listed in the yellow pages or you can even find their advertisements in the newspapers or realty catalogs. The newspaper is also a good source of knowing value of real estate in your area and prevailing interest rates. As already mentioned, use a mortgage calculator to help you make your decision.
There are different types of mortgage calculators, each yielding their own results. What is more, you can make use of multiple calculators to ensure the figures you arrived at are similar. Some mortgage calculators will lead you directly to the website of lenders and you can automatically see the loan schemes they have. Even if you are not looking to purchase a home right now, you can use a mortgage calculator to help you determine how much you will need to save to buy a house in the future, how much your salary levels must be to attain your dream of purchasing a new home and so on.
Article by John Hoots of ChicagoMortgageSpecialist. For more information on Chicago home refinance, visit his site today.