Home loans: what you should know !

Finding home loans can be a daunting task, whether you�re a first time home buyer or an existing homeowner. The good news is that there are more options than ever to help you find the loan that�s right for you.

Check Your Credit Report
An important first step is to check your credit report, preferably several months before you intend to apply for a loan. You are entitled to one free copy of your report every 12 months so it�s easy to check it out. When you receive your report there are a few things that should garner your attention. First, check to see that the information it contains is accurate. Does it incorrectly show late or missing payments? Does it show credit cards or other credit accounts that are incorrect? If you see anything that is not right then consult with the credit reporting agency regarding their procedures for making corrections.

If My Credit Is Bad Can I Qualify For A Mortgage?
Usually the answer is yes, but the loan process will likely be more involved and the interest rate you�ll pay will be higher than if you have good credit. Look for lenders that specialize in loans for people with poor credit and learn more about the programs they offer. Even though a mortgage will cost you more if you have bad credit, in the long run it can help you repair your credit history if you make your payments faithfully.

What Kind Of Loans Are Available?
Three basic types of loans are available to help you buy a home � fixed rate, adjustable rate and interest-only. A fixed rate loan comes with an interest rate that stays the same throughout the loan term, but an adjustable rate mortgage (ARM) comes with an interest rate that may move up and down at various intervals. Your payments will usually be lower with an ARM (at least at the start of the loan) but over the life of the loan you run the risk of your payments going up if interest rates rise.

A newer type of loan is the interest-only mortgage. It features some of the lowest monthly payments you�ll find, but this comes at a cost. The payments are low for the first few years because you are not paying anything toward the loan principal, just the loan interest. This means you are not developing equity in your house, and when the payments switch to a combination of interest and principal you will see your payment go up.

Summary
Obtaining home loans can be intimidating at first, but with a little information and research you can better prepare yourself for the loan process. Start by knowing what�s in your credit report and correct any mistakes that appear. Think about the type of mortgage that will work best for you and check out several lenders who offer that type. If you�re not sure what kind of loan is your best option then ask potential lenders to make a suggestion. Take advantage of information resources at your local library, on the internet and in financial publications such as magazines and newspapers. With some time and effort you will be in a position to make an informed decision regarding a loan.

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