Do you want to purchase a house? Are you in need of a mortgage loan? If yes, you must find out the various factors that affect mortgage rates. In order to find cheap home loans, you must also compare the rates on different types of loans.
How can you obtain a cheap home loan?
Some of the tips that can help you find cheap home loans are:
1. Research on types of mortgage : There are various types of mortgages available. The most common types are fixed-rate loans and adjustable-rate loans. Fixed-rate loans are very affordable when market rates are low. If you obtain this loan, your monthly payments will be the same. The introductory rates of adjustable-rate loans are generally lower than that of fixed-rate loans but gradually increase with changes in market indexes. If you plan to stay in your house only for a few years, you can reduce your mortgage cost by obtaining an adjustable-rate loan.
2. Shop around for mortgage rates : The interest rate on the same types of home loans varies with lenders. Before obtaining a loan, you must shop around and compare the mortgage rates offered by the different lenders. Some lenders may offer you cheap mortgage rates that are not genuine. It is always better to ask the lenders for annual percentage rates (APR) that represents the total fees. By comparing the APRs, you can obtain a low cost loan.
3. Check your credit report : Lenders analyze your credit report to determine the risk the take by offering you loans. You must review your credit report for incorrect/incomplete items and take the necessary steps to fix it. By eliminating negative listings from your report, you will be able to obtain cheap home loans.
4. Make a higher down payment : Lenders generally require a down payment of at least 20% of the purchase price of your property. However, you can also obtain a loan by putting down less but in such a situation, you have to purchase private mortgage insurance (PMI). The PMI will increase the cost of your home loan. You can reduce your monthly payments and hence the overall cost of your home loan by making a larger down payment.
5. Pay higher points : Points are interest paid in advance. One point is equal to 1% of the home loan amount and is normally equivalent of 1/8 of 1% of the mortgage rate. You should request your lender to allow you to pay higher points. By paying higher points, you will be able to reduce the interest rate on mortgage.
If you cannot afford a conventional mortgage and want to get cheap home loans, you may consider applying for FHA and VA loans. FHA loans offer down payment as low as 3% to eligible individuals and VA loans offer mortgages with out down payment to Veterans of the U.S. military.