Tips For Getting The Right Mortgage Loan

Mortgage loans come in many different combinations. They range from no documentation mortgage loans, loans for borrowers with low income, an 80-20 loan, fixed versus interest only mortgage loans. Consider the advantages and disadvantages of the different types of loan products before committing yourself. There are many different types of mortgages in addition to these. This article gives you tips on the four different types of loans mentioned to help you decide if one or the other is in your best interest or not.

Let’s start with a no documentation mortgage loan. This type of loan gives you the ability to borrow money without the need to provide proof on income, what your current assets are, or even verification of employment. What determines if a lender is willing to lend you money is simply your credit score. Your credit score will determine what your loan rate is. This type of loan is useful for those who are self employed and do not draw a regular paycheck. There is a cost involved with using a no doc loan, typically the interest rate you pay is higher than a loan with verified employment and proof of income and a list of verified assets. Interest rates can be greater than one percent higher than a conventional loan. People with low income might find this a useful way to get the mortgage they need. The next tip deals with getting approved for a mortgage loan if you have a low income.

If you have a low income, here are some tips for getting approved for a mortgage loan to purchase a home or real estate property. There are no secrets about getting a mortgage, the tips that follow are even more important for someone with low earnings. First, make sure your credit score is good. How do you do that? Pay your bills on time. What, you don't have any bills? If you are in the position of not having to pay any bills - and the only scenario I can think of where you are earning a low income and not paying bills is if you live at home with your parents - then borrow a small amount of money, from your bank, or take a small cash advance on a credit card and pay it off on time. Even if you don't need the money, you can help with your credit score if you have a history of paying your debts on time. Just because you have a low income doesn't mean you can't save up the typical 20% for a conventional loan. It might take awhile and you might not be able to afford the largest home in the neighborhood, but having a down payment available in a liquid instrument, i.e. - cash or certificates of deposit, tells a lender that you are serious about taking on the responsibility of borrowing money. The next lending tip is about the 80-20 mortgage for those borrowers how do not have enough money to put down twenty percent for a down payment. An 80-20 mortgage loan is the combination of two loans, a primary loan - the 80% portion, and typically a home equity loan on the remaining portion of the home purchase - the 20% portion. This type of loan gives the borrower the ability to get into a house that they might not otherwise afford. Now just because this is available doesn't mean that you want to use this without considering the risks and costs involved. If you are in a position were you know you will be earning more money in the not to distant future, this type of loan might make sense if you think you will be able to "grow" into your home payments. I say that cautiously and recommend that you consider your financial situation carefully because of the downside if you are not able to consistently make your monthly payments. One of the other advantages is that this type of loan avoids the private monthly insurance, pmi, typically required for someone not making a 20% down payment. Private mortgage insurance can not be deducted from your gross income for tax reasons - at least it can't as of this writing, where a home equity line of credit typically can. The next tip lets you know the pros and cons of a fixed interest loan versus an interest only loan.

Some of the advantages of a fixed loan include having a predictable monthly payment. Typically the peace of mind of not having to worry if your payments will vary is the chief reason that people select this type of loan. This type of loan gives the borrower a high amount of tax deductible interest in the early life of the loan. One downside is that the fixed rate doesn't adjust (that should be obvious). If interest rates decline over time, the fixed loan borrower doesn't get to take advantage of decreasing rates without having to refinance their mortgage. For those who take out as interest only mortgage loan, they get the tax advantage early on of having a loan that is 100% tax deductible combined with typically a lower than fixed interest rate, often referred to as a teaser rate. The downside is less certainty on payment amounts in the future. These types of loans are great if rates are decreasing, but can be significant problems if rates rise in the future. For a borrower who leverages themselves to the hilt with an interest only type loan and rates creep up, watch out.



First Time Home Buyer