The World of Home Loans

by : Alan Lim

Home Loans

A home is not something that one goes around buying on a regular basis. It is a carefully planned move and often comes attached with high expectations and anxiety. It is also more often than not unrealistic to imagine buying a home without a home loan of some kind. But let's begin with the preparations you need to do to apply for a home loan.

Preparing for a loan application

Some lenders might not require any but if you are in a position to make a down payment, the larger it is the better it is. Calculate your personal finances; total monthly income and the amount you have as savings to estimate how much you can spend on your monthly loan payments. Don't forget to gathering your documents; pay stubs and the W-2 forms if you are employed, and a balance sheet and income tax returns for those who are self employed. All applicants must also have ready their bank statements and information on investments. If the loan applicant is someone who has retired with pensions, a 1099 form, along with the person's social security award letter and copies of the pension checks are generally required.

Type of home loan

There are several types of home loans that a lending organization can offer to people. The most popular is possibly the Fixed Rate Loan which lets you know from the start how much your periodic instalment payments will be because both the principal sum as well as the interest rate is fixed. This way, you have the advantage of preparing for your payments on time. The other option is generally the Adjustable Rate Loans. There are also other flexible loan programs that are offered buy this may vary from lender to lender.

Interest on a home Loan

The national mortgage rates also change based on a variety of reasons. For example, the interest rates on the first week of August 2007 have been as follows; 6.11% for a 30-year fixed loan, 5.76% on a 15-year fixed loan, and a 6.60% on a 30-year fixed jumbo loan. Because rates can fluctuate at any time, fixed loans are generally considered safe.

Home loan benefits

Benefits from home loan can differ from country to country. In the United States, the Department of Veteran Affairs offers one of the best home loan benefits for war vets. A Veteran Affair Loan generally ensures a guaranteed loan where the interest rates are negotiable and tax deductible and other fees generally lower than usual.

Normally they also don't require any down payment. General professionals who earn $50K to $80K a year can also sometimes qualify for a discount on the interest rates.
There are other general advantages of a home loan too, especially if you take a home equity loan. All of your interest on the loan is tax exempt. Also, because the home loan industry it self is so huge and an interlinked in the international financial market that companies often compete with each other to lure more customer to their institution by offering better rates and packages. Also, as the prices of real estate continue to rise as it has for sometime now, the homeowner is also generally able to take larger loan.