Home loans are an important financing option that many individuals need to take advantage of. The majority of people who want to buy a house do not have the cash on hand to pay for their new home upfront.

For this reason, most individuals need to take out home mortgage loans to help them be able to afford their new houses.  Before you apply for a home loan, it is important that you familiarize yourself with this option. There are many different types of loans you can apply for, and each of these options comes with their own terms and requirements. Usually, this affects home loan rates, which will determine how much interest you need to pay on your loan and how long you will pay for it. Regardless of your financial situation, make sure you understand your loan options and how much you can expect to pay.

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Data Sourced from The U.S. Department of Housing and Urban Development's (HUD's) Office of Policy Development and Research (PD&R).

How to Get Home Loan Pre Approval

Before you decide to buy a house, you need to know how to get pre approved for a home loan. Your financial situation will affect the type of loan you are eligible to receive. This, in turn, directly affects the type of house you can buy. Rather than finding your dream house and then learning if you can pay for it, you should figure out the type of house you can afford before you begin searching. This can save you time and energy throughout the process.

If you are looking to apply for a first-time home buyer loan, you must go to a lender and get pre-approved. Usually, this means you need to go to a bank and speak with an agent about your options. He or she should then be able to tell you whether you qualify for a loan.

Source: https://www.phmc.com/infographic/Infographic-How-a-Mortgage-Pre-Approval-Benefits-You.jpg

Different Types of Home Loans

If you are searching for a first time homeowners loan, there are different options available to you. Usually, these relate to your income history and whether you or your spouse is a veteran.

Learn About VA Loans

A VA home loan is guaranteed by the U.S. Department of Veterans Affairs (VA). This means that the VA will pay a portion of your loan if you default on it. Due to this added security for the lender, veterans home loans usually come with more favorable terms for the borrower.

Not everyone qualifies to receive a VA house loan. In fact, VA home loan requirements state that only veterans, current service members and surviving spouses can take advantage of this opportunity. Keep this in mind before you apply.

Learn About FHA Home Loans

An FHA home loan is guaranteed by the Federal Housing Administration (FHA). These loans are especially appealing to first-time homeowners who do not have high credit scores or a substantial amount of money to put towards their down payment. Banks and other lenders are responsible for approving these requests, which means you need to apply directly to them for consideration.

About First Time Home Buyer Loan Rates

Before you purchase a house or decide which loan you want to use to do so, it is important that you take into account the home loan rates and how they can affect you. On one hand, you need to consider the length of your loan. This determines how long you will have to pay back the amount you borrowed, as well as any interest related to your loan. Usually, your home loan terms will be 25 to 30 years.

It is also important that you do research regarding current home loan interest rates. This refers to how much interest you need to pay on the principal amount you borrow from a lender. The lower your credit score, the more likely you are to have higher interest associated with your loan. For this reason, it is important that you are in good financial condition before you apply for a home loan. Otherwise, you could find yourself paying more long-term than if you waited to pay off other debts before applying.

Tips to Budget for Your First Home

Making a purchase on a home may be one of the largest purchase you will make in your life. Therefore, this purchase requires some thought and preparation. Look below to find some helpful tips on how you can save for your dream home.

  1. Know your net income. It is important to know how much of the mortgage you will be able to pay every month. You can  always review your pay stub or use an online calculator.
  2. Pay off your debt. It is possible to buy a house while having debt. However, paying it off will allow you to pay more of the mortgage. Paying off debt will also improve your credit score, which can give you a better interest rate on your home loan.
  3. Save for your deposit. The majority of lenders will require a 20 percent deposit. For example, if you purchase a home for $200,000, the deposit will be $20,000. Because this large sum of money increases your chances of getting approved, it is crucial to organize your budget towards saving.
  4. Get Pre-approved. Getting pre-approved for a loan will increase the chances of you being ready to put down an offer. Sellers will take you more seriously when they see that you want the sale.