Beginners Guide to Home Loans


Now that you have decided to purchase your first home, you will need to seek a home loan. This process can seem intimidating, but keeping a few things in mind while you are searching for a loan will make this task easier. The loan that you will need is a secured loan. This means that your loan will be secured by your new property, and it offers you a number of advantages.

The Advantages of a Secured Loan

With a secured loan, your lender may charge a lower interest rate, and this will make your loan less expensive over the long run. With a lower interest rate, you have lower monthly payments. However, you will need to meet the requirements to qualify for a low interest rate, and this may mean that you will need to have a high credit score.

The good news is that you have several options. One lender may require that you have a credit score in the excellent range to qualify for the best interest rates, but another lender may require that your scores are in the good range. This makes it very advantageous for you to seek a loan from more than one lender before choosing to apply with one.

Lowering Your Interest Rate by Paying Points

The interest rate must not be your only consideration because there are other factors that influence how much you will pay for a loan. You may wish to pay more money upfront so that you can qualify for an even lower interest rate. If you decide to pay what are called “points,” you will be able to lower your interest rate by a particular percentage with each point.

Determining if the Fees Are Reasonable

Another consideration is the fees that each particular lender charges. Some lenders charge several fees, but others will have a more reasonable number of these charges. You may find that some lenders will place several fees under the umbrella of “origination fees,” and this can add up to a large sum of money. You will want to examine each one of these fees in order to determine if they are really necessary. If they seem to be excessive, you can move on to the next lender.

If it seems as if seeking a home loan will be a daunting task, you can allow a broker to help narrow down your choices for you. A broker will inquire with several different lenders to find the best deals for you and your situation.