How to Know if You’re Getting a Deal on Your Home Loan

How to Know if You’re Getting a Deal on Your Home Loan

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Getting the best deal possible on your home loan could mean the difference between being able to afford your dream home and being forced to settle for something less.

Though the average home price has increased roughly 600 percent since 1963, the loan-to-price ratio has decreased. This means that loans today are, on average, far better than they used to be.

Let’s examine how you can ensure that your home loan provides the best value.

Take Advantage of Loan Programs

There are certain programs that enable certain individuals to acquire home loans that have lower interest rates, require no down payment and offer other unique advantages.

The most prominent of these programs are FHA mortgage loans. These government-insured loans have a low down payment, and they often have significantly lower interest rates than conventional loans.

Another prominent type of loan designed to make home loans cheaper are VA loans.

The requirements for these loans are specific to the programs. VA loans may only be acquired by qualified veterans, while FHA loans may have certain requirements as to who can apply for them.

Watch Interest Rates

Interest rates with regards to the real estate market will fluctuate. These reflect how much confidence investors have in the housing market, which in turn influences how much your total home loan will cost.

The best way to get a lower interest rate is to carefully watch the market. You can speak with your lender about looking for a certain rate, as they may be able to help you when the interest rate, for example, drops significantly during a certain part of the day.

Your best bet to get the lowest interest rate is to look at historical data. You can see how home mortgage rates fluctuate, which in turn can help you predict what month they will be the lowest.

Avoid ARMs

Adjustable-rate mortgages (ARMs) may have interest rates that appear lower than fixed-rate mortgages, but they seldom stay that way. ARMs will typically begin with a lower interest rate that then fluctuates in accordance with the standardized “prime rate” for home loans.

Given the way mortgage loans are repaid, this can significantly delay how many years it takes before you begin repaying the principal of your loan. This results in your loan costing substantially more than what a fixed-rate mortgage would cost.

Understand Mortgage Calculations

There are many fees and costs associated with home loans. Understanding them all would require a significant amount of time and study.

The best way to understand how different home loan arrangements might benefit you is by using a mortgage calculator. Sites like Sente Mortgage have an Austin mortgage calculator freely available for people to use.

You can see how paying at different interest rates, different types of mortgage loans and other options would interact by using these tools.

Getting the Best Home Loan Possible

By working with your prospective lender and considering your options, you can often get the best loan possible for your home. This may allow you to have significantly lower mortgage payments, to pay your loan off sooner, or to substantially reduce the total amount you have to repay.

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Categories: Home Buying

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