When you decide to buy your first home, you enter the real estate industry, a world that has its own jargon, culture, and etiquette. Many of the terms and requirements may seem foreign to you, but over time, you will learn their meaning and how they affect your financial decision-making. An experienced home loan representative can walk you through the language of home purchasing and ensure you have a good understanding of your part in the financing process.
1 – Learn The Types Of Home Loans
Homebuyers have a number of mortgage options available to them when they are ready to purchase a property:
- Fixed Rate Loans – These mortgages have an interest rate that remains the same throughout the life of the loan. The recurring mortgage payment can be worked into a household budget more easily. These loans can be a good idea for individuals who intend to stay in a house for a long period of time.
- Adjustable Rate Loans – These loans have a lower rate of interest at the beginning of the mortgage term, which increases after a period of time, generally 3 to 5 years. This type of loan makes it easier to afford a mortgage payment at the beginning of the loan term, which can be covered by higher income amounts as the years pass. These loans can be a good idea if you expect to be in the home only for a few years.
- Jumbo Loans – The jumbo loan was designed for individuals purchasing more expensive properties, with loan amounts in the range of 425,000 to 625,000, depending on the region of the country. Jumbo loans often require a larger down payment and more stringent credit criteria.
2 – Make Sure You Have A Good Credit Report
Your credit report is a record of the money you have borrowed in the past and your payment habits. The record is scored by placing a higher number on payments that have been made completely and on time. A higher credit score is more favorable to a good interest rate for a home loan. In general, financial institutions give preference to individuals who have a credit score of 700 or higher. However, you can be approved for a home loan if your score is as low as 620, and in some cases, as low as 580.
3 – Understand Your Closing Costs
Closing costs are the expenses you incur during a real estate transaction. They include transfer fee, title insurance costs, taxes to state or local governments and prorated portions of real estate taxes. Closing costs typically amount to 3 to 6 percent of the purchase price. You may be eligible for a reduction of closing costs for your home purchase in some circumstances.
Lending companies, such as Assurance Financial Group, can provide the extra time and attention you need to understand the complex language of real estate transactions. Call them today to discuss your home loan needs.
Author Bio: Emma Sturgis is a freelance writer living in Boston, MA. When not writing, she enjoys reading and indoor rock climbing. Find her on Google +