The Real Deal On Loans And MortgagesUnderstanding the current state of loans and mortgages is essential for financing a home purchase at a reasonable rate. The home-price environment has made it almost impossible for many people to get an affordable rate, although things are looking up in some states such as New York, where the lending rate around 6.5%. For loans intended for use in college, many banks have special educational loans with lower interest rates and tax benefits. It may be a better alternative to taking out a mortgage because payments are deferred while the child is in school. Processing is usually faster than for home mortgages and requires no collateral as long as the child fulfills some requirements such as proof of enrolment in accredited colleges or university. However, if a mortgage is what is indicated, here are some steps to ensure that you get the best deal possible. 1.Check your credit by contacting credit bureaus. This will eliminate errors in credit reports that can spell disaster for the credit rating and the chances of getting a loan with the best rates. 2.Shop around. It would be good to canvass for the best rates. Online lending sites would be the easiest place to start. You can also check with your bank and your union or trade association who may have an affiliation with a lending institution. Either might have special rates and promos for existing clients and members. 3.A mortgage broker may also come in handy, if they can match the best rates, because they will handle more paperwork and will probably be more flexible than automated underwriting software, especially if the credit rating is less than pristine. However, the smaller mortgage lenders will less likely be able to give the best rates. Check your local association of mortgage brokers for a list of mortgage brokers in the state. 4.Choose your mortgage type. There are many types of mortgages, and while standard fixed-rate loans of 15 to 30 years may seem attractive, it would be best to go for a hybrid adjustable-rate mortgage fixed for a number of years depending on your individual time frame (the length of time you expect to be in one location). By the end of the loan term, you will be ready to unload. However, recent trends are leaning towards fixed-rate mortgages because rates are not expected to go much lower. 5. Other types of loans include interest-only mortgages and piggy-back loans. There are also purchase-and-renovate loans, allowing buyers to finance both the cost of the home and the renovation. However, there can be disadvantages. Purchase-and-renovate loans, for example, carry a higher interest rate. Other mortgage types include miss-a-payment mortgages and payment-option mortgages. A mortgage may also be a good source for financing a college education fund provided the prevailing rate is favorable for a long-term loan. College savings funds have higher returns the longer the maturity terms and they are secured investments. Moreover, since they are tax-free and the interest rates on mortgage loans are tax-deductible, then it may make good economic sense. Consult with your bank adviser before you decide. Loans for poor credit are a different proposition altogether. Such loans typically carry higher interest rates some of 20%. Some loans, called “payday” loans, which anticipates the next paycheck, carry a whopping 400% interest and are best kept on extremely short terms. If a loan is necessary under these circumstances it would be best not to miss payments so as to improve your rating and get refinancing later at better rates. Rule of thumb in acquiring loans and mortgage: do your homework. The mortgage market is especially volatile and being aware of the current situation will help greatly in choosing the right mortgage for you. |