First Home Loan

By: EconomyWatch Content   Date: 28 December 2009

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Buying a home takes a lot of effort in terms of choosing the right home loan type. To make sure that you seize the best deal, you should look only for those aspects of home loans that meet your specific situation. There are a number of things to consider before you shop for your first home loan.

First Home Loan: What to Do?

 

The foremost step is to contact the three credit reporting agencies, i.e. TransUnion, Equifax and Experian, to get a copy of your credit report. Every lender would want to ensure that you have a sound payment history. This is because a poor credit report is very risky for them to accept, as it shows the inability of the borrower to repay the loan. A good payment history will give the lender assurance that the money will be paid on time.

If your credit report has any errors, get them rectified as soon as possible. Make sure that all the three agencies have the same particulars on your credit report. Pay off all the outstanding bills to improve your credit rating and obtain low interest rates.

 

The next thing to do is to check prevailing mortgage interest rates and the trends they have been going through. Interest rates fluctuate on the basis of the national index. So, you should keep an eye on the economic indicators to decide when to apply for your first home loan. This also enables you to take a decision on the type of interest that you should take, i.e. adjustable or fixed.

 

The next step is to choose the type of home loan you want to take. Factors that influence home loan type include down payment, monthly payment, loan term, income stability and prepayment options. How long you wish to stay in that house also affects the type of home loan you should take.

 

Contact as many lenders as is possible and obtain home loan quotes to compare interest rates, fees and other costs involved in the various loan types. You can also consult a mortgage broker as s/he has expertise in various existing home loan products. Narrow down your research by considering factors such as prepayment penalties, frequency of payments and mortgage insurance requirements.

 

At last, when you finalize a lender, ask what documents you need to submit to get the loan. Also, consider the fees that you will have to pay for the application or credit report. Assessment of the loan application is a quick process, so you will come to know very soon whether your application has been accepted or denied.

 


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