Types Of Home Loans
A home loan or real estate loan simply means an amount of money borrowed from a bank or other financial institution to buy a home. Home loans mostly include a fixed or adjustable interest rate, and repayment terms. Generally people take home loans for the purpose of purchasing a home/flat, renovation, extension or additions to the present home, or construction of a new home. Home loans can be secured or unsecured, though most banks demand that you place your home as collateral with them in case of non-payment. Some other uses of home loans are making home improvements, starting a new business venture, consolidating debts, paying off credit card debts and even paying for medical expenses incurred abroad.
There are many sources where you can get home loans. First, you can approach your friends or relatives who may have taken a house loan in the past. Secondly, you can check out your local realty office, where they would usually have a list of all the lending companies in your area along with their interest rates and details. You can also check the Internet and the classified section of your newspaper for advertisements of home loans. Most lenders will require you to fax or mail some documents to approve the loan.
There are two different types of home loans, namely, fixed-rate and adjustable-rate. Fixed-rate home loans are generally preferred by people who want a fixed interest rate on the amount borrowed for the repayment period. The major benefit of a fixed jumbo loan rates is that the amount of interest you pay throughout the term remains consistent. However, in exchange for this, your house might lose its equity value over time. In case of adjustable-rate loans, the interest rates may fluctuate according to the fluctuating prices of the commodities market and these may vary from time to time.
There are several factors that affect interest rates. Usually, the interest rates are higher for first-time home buyers. However, if the borrower has a good credit history, interest rates are generally lower for him. On the contrary, bad credit borrowers have to pay higher interest rates because their credit score is considered to be an indicator of their capacity to repay the loan. Usually, it is said that a borrower's credit score indicates his ability to handle money and thus his capacity to pay debts.
Usually, a home loans lender will require you to prove to them that you are in dire need of money at the moment. They will probably check your present employment status as well as your previous jobs to verify whether you are capable of repaying the loan on time. This will enable the lender to determine your ability to pay promptly. Usually, a borrower will be required to show proof of his monthly income along with his monthly expenditures. The payment records that will be provided by the lender should be able to clearly reflect your financial status. Get the best home loans on this website.
Usually, home loans are given to people who wish to construct a new house or remodel their existing dwelling into a more attractive place. On the other hand, home purchase loans are given to investors who are willing to finance the construction of homes for resale. In short, home loans and home construction loans are two different types of financial options that one can take advantage of. To get a detailed overview of this topic, see here: https://en.wikipedia.org/wiki/Mortgage_loan.