Everyone has an ideal home that they want to live in someday, unfortunately not many Americans ever find the home of their dreams. Due to astronomical interest rates on home loans from banks, many home buyers are forced into shady mortgages that banks know they can’t afford. In November of 2015 it was estimated that one out of every 1,269 homes would experience foreclosure — here are some tips and tricks for dealing with home mortgage lenders.
The Details Behind Mortgages
A typical mortgage consists of a loan that is paid off over 15 or 30 years; the sum of money borrowed from a mortgage lender is referred to as the principle. Home buyers must pay interest on their mortgage, which varies based on income, credit history, and down payments. The Home Loan Learning Center found that a large number of lenders require a minimum credit score of 680 for a mortgage. While every mortgage lender varies, experts suggest that homebuyers prepare for a down payment of at least 3.5%. Many home buyers fall into the elaborate traps laid out by banks by thinking that they can just barely afford a home — at most your entire monthly debt payments (including the mortgage) shouldn’t exceed 36% of the gross monthly income for your household.
How to Get Lower Interest Rates on Home Loans?
Everyone wants access to low interest home loans, but many lenders turn down home buyers based on several factors. It is always a good idea to fix errors on credit reports and to generally start establishing good credit to get access to low interest home loans. Increasing your down payment is another way to help counteract low credit scores; 20% of the home’s value is a sizeable down payment, for instance. Since interest rates on many high-risk loans have a tendency to float around, home buyers are suggested to lock in the interest rate with fixed rate mortgages as soon as they feel comfortable with the figures. Different types of mortgages are available from different lenders; consider your options, do the math, and fix up your credit history before falling into the home loan pitfalls.