Whether you are looking for a 1st time home buyer loan, home improvement loans or any other type of home loan, the most important step is to find the right lender. Banks are a good place to start, but they aren’t the only solution for obtaining a home loan. Many other financial institutions offer loan programs you may not find at your local bank. Do not discount national lenders. Many people believe that there will be less personal attention at a national lender. However, you may get better rates at one lender than at another, and a local bank does not always have the same flexibility as a national lender will.
Additionally, you should fully understand what types of loans are available for new or existing homeowners. That knowledge will help you get the right loan for your needs.
Types of New Home Buyer Loans
The names of new home loans often are fairly self-explanatory. Each one has a specific way of helping individuals afford a new home where the most traditional of conventional loans may exclude them. One of the most helpful of all new home buyer loan types is the 1st time home buyer loan.
It can be very difficult for young individuals or families to obtain a home for the first time. Very often there isn’t enough credit history to establish a reliable pattern for banks to use as a risk assessment. Because of that, those people are looked over when instead, they could be using a new home loan to build credit and make life better.
In today’s troubled economy many people have bad credit or haven’t been able to save enough for a down payment. In those cases, deserving people can’t get a loan based on normal risk evaluation. Poor credit home loans and no down home loans help those people re-establish themselves and enjoy the pride of home ownership again.
Poor credit home loans give lenders wider parameters to judge ability to pay. No down home loans let individuals and families get a loan even when they have no savings for a down payment.
Both the no down home loans and poor credit home loans have the drawback of higher interest rates. One way for savvy new home owners to use these types of loans to get into a home and begin rebuilding their credit is to later look for refinancing at better rates once their situations are more favorable. Also, some lenders will provide separate loans for a down payment so that the borrower can get a more traditional 1st time home buyer loan. This type of loan helps buyers avoid higher interest rates.
For buyers looking for a new home getting a graduated payment loan may work in their best interest. When money is tight, but expected to improve, this type of loan can get them over the hump of a low period. With graduated payment loans the initial payments are very low. In some cases the payment won’t even cover the full interest for the year, much less make a dent in the principle loan amount.
Over time the payments increase so that the difference in the low early payments is covered. When choosing this type of loan it is very important buyers are fully aware of how fast the payments increase and what the escalated amounts will be. There should never be any surprises that could cost you your home.
A good time to consider a graduated home loan is when you would like think you may want to move within several years. By making lower payments early in the new loan there is plenty of time to save up for a down payment on a different home for an expanding family later on down the road, and the existing home can be sold before payments get too large.
Ways to Make the Best Use of Home Equity Loans
Existing home owners need loans too. Home equity loans have much different requirements than new home loans. Buyers can often get great terms on home improvement loans used to make their existing home better. Home equity loans are also a great way to pay for important items such as schooling. Since home equity loans are usually tax deductible it can be very cost effective way to get the most out of every dollar.