New Home Loan

By: EconomyWatch Content   Date: 21 January 2010

About The Author

EconomyWatch Content

Follow The Money

EconomyWatch, Content Team

 

  • Dot Div
  •      

If you are considering taking a new home loan, you should also take into account the factors that influence the rates. There are some factors that are within your control.

New Home Loan: Factors to Consider

One should consider the following factors while applying for a new home loan:

Debt to Income Ratio: Before taking a decision on the amount of loan to be extended, every lender calculates your debt to income ratio. This is calculated by taking into account your monthly debts and income. A high debt to income ratio means that a considerable part of your income is going towards the payment of your existing debts, which signifies high risk for lenders. If you have a high ratio then the interest rate is likely to be higher.

Payment History: You can improve your chances of getting a good interest rate by paying your bills on time. These could be credit card bills or car or rent payments. A single late payment can affect your credit history.

Property Type: The type of home loan that you are entitled to is influenced by the kind of property against which you take the loan. Property may be a single family home, multi family home or condominium. The rates are lower for properties that bear lesser risk.

Loan Amount vis-à-vis Property Value: The lender will compare the loan amount with the value of the property to calculate the LTV (loan to value) ratio. If this ratio is high your mortgage will carry higher risk, which will end up in a high interest rate on your home loan.

Loan Amount and Duration: The higher the loan amount, the higher will be the interest rate. Moreover, the longer the duration of the loan, the lower will be the rate of interest on your home loan.

Closing Costs: If you do not wish to pay all the closing costs, then you can expect to pay higher interest rates. This is done to compensate for the closing costs.

Down Payment and Points: You can get good interest rates by paying down at least 20% of the loan. You can also pay points to lower the interest rates by paying your principal and lowering your monthly payments.


  • Dot Div
  •      

Most Popular in Home Loans

Related Links
blog comments powered by Disqus