By financen | April 30, 2018 - 5:16 pm - Posted in Home loans, Loan

Home loan is one of the most important factors when buying a house. This helps you financially to finally make your dream come true. Thus, it is important to choose and decide carefully about the right loan type that will suit you best. Two of the most common loan types are fixed rate and variable home rate.

In this article, we will discuss these two types of home loan including advantages and disadvantages to help you decide which is the best type to apply for. This is very important to make sure that there will be no problem when paying off your mortgage.

Fixed rate home loan

Fixed rate home loan charges “fixed” (thus the name) interest rates that does not change throughout the lifespan of the loan. It does not matter if the cash rates or interest rates are lower or higher for particular month. With fixed rate home loan, you have a fixed amount that you need to pay each month despite all other factors.

Advantages of fixed rate loan

  1. With fixed rate mortgage, borrower is protected from sudden increase of monthly payments in case interest rates rise.
  2. It is easier to understand and remember the amount you owe each amount because the amount is fixed.
  3. It is easier to save and plan your budget since you know the exact amount that you need to pay. You can allot the specific amount so you are sure that when the due date arrives that you have money to pay.

Disadvantages of fixed rate loan

  1. It may be difficult to qualify for a loan especially when the interest rates are high.
  2. It may also be difficult to avail this type of loan if you have less than excellent credit score.

Finding the lowest fixed rate home loan should be your main goal in case you decided to go for this type of loan. Also, be sure that your credit score is excellent.

Variable rate home loan

This type of loan is also known as adjustable-rate mortgage with interest rate that varies over time. The initial interest rate is set below the market rate compared to fixed rate. However, over time, the rate varies depending on the current interest and cash rates so there are chances that it will go high or low.

Advantages of variable rate home loan

  1. The initial payments can be very low.
  2. The borrower can enjoy lower interest rates in case the cash rates and interest rates in the market is low.
  3. Availing loan in this type is easier even for first time borrowers.

Disadvantages of variable rate home loan

  1. Monthly payments may change frequently and significantly.
  2. It can be difficult when the interest rates rise especially if you avail a large amount of loan.
  3. It is more complicated to plan your budget since you do not know the exact amount you need to pay. Sometimes, your estimates might be lower that can ruin your entire budget for the month.

So what is the right type of home loan to avail? It is important that you weigh the advantages and disadvantages. Also, take into consideration your income as well as your lifestyle to know which type of loan is best for you.

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We might think for a while that the worst of financial crisis is over, but this is not the case. There are millions of people who are still struggling to meet their commitments and have still not recovered. Various markets are being encouraged with many incentives to assist these people in need.

The property market is no different and U.S. President Barack Obama has introduced a new program for assisting people in need. Its called Home Affordable Modification Program (HAMP). This program will help people in paying their mortgages quite easily. It will reduce the monthly payments which will be a huge relief for the homeowners.

With the help of this program, homeowners monthly payments will go down to 31% of their pre-tax income, even less in few cases. This modification plan will only be accepted if the modification equals net more value than foreclosure would.

In order to qualify for this program, you have to meet 4 main criteria:

  • The residence on which you want your monthly payments to be modified should be a primary one.
  • Your monthly mortgage payments should be more than 31% of your pre-tax monthly income.
  • Your loan amount cannot exceed $729,750
  • You have to prove that you cannot afford the current monthly repayment plan.

There is one more benefit of this program. Homeowners who get approved for this program are eligible for $5000 credit to reduce principal debt on their very first mortgage. But there is one criteria here that has to be met. You should not miss even a single payment and pay it in a timely manner for five years.

Once you meet the above requirements, there’s a government plan called monetary stability plan in which the mortgage providers have to necessarily participate if they receive funds from the government.

This move is not something that the government has taken out of kindness. In fact, this is a positive economic step taken with the motive of stimulating the economy and leading to expansion.

All those who are having a hard time in making their mortgage payments and are unable to figure out on how to solve the problem, look into this program introduced by the government. Otherwise, the lenders and the housing market will see huge losses again.

More information about Home Affordable Modification Program (HAMP) at:  http://www.makinghomeaffordable.gov/programs/lower-payments/Pages/hamp.aspx

By financen | March 31, 2009 - 4:54 pm - Posted in FHA, Home loans

The Federal Housing Administration has been helping Americans own their own homes since 1934. In 1934, all Americans were struggling financially due to the Great Depression. Most Americans were renting their homes (if they had a home to live in). Today American’s find themselves in situations similar to our Grandparents and Great Grandparents. Owning or keeping a home can feel like an impossible dream. Today, the FHA remains committed to helping The United States of America be a country of home owners.

You are probably wondering exactly how does the FHA help Americans become homeowners. The FHA does not loan money; it insures the mortgage loan. This means that FHA will pay the lender (bank or mortgage company) if the homeowner cannot. In exchange for this insurance the FHA demands that lenders make mortgages more affordable to the average American. This process allows lenders to confidently lend money to people that might not otherwise be able to obtain a loan.

Benefits to the home buyer:

  •   Easier to qualify
  •   The FHA does not require perfect credit for its home buyers.

In fact the FHA does not require any minimum credit score to qualify. The FHA understands that “life happens” and there are various circumstances that can cause a person to have financial difficulty. Therefore the FHA looks at your overall credit history and takes into account life’s unexpected circumstances when approving your loan.

  • Smaller/ less restrictive down payment
  • The FHA requires only a 3.5% down payment. This is considerably lower than a conventional mortgage. Additionally, on an FHA loan, down payment money can come from many sources, including a gift from a family member or government agency. This can be a huge help, as saving for a down payment is one thing that keeps many people from owning their own home.
  • Low cost
  • In general, due to low interest rates, FHA monthly mortgage payments are more affordable.
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By financen | October 30, 2008 - 5:33 pm - Posted in Bad Credit, Home Loan, Loan

People with bad credit often get disheartened when they are not approved for any kind of home loans from any reputed financial institutions or lenders. There are ways by which you should be able to get home loans from any reputable financial institution just like any other person with a good credit history.


Find out a good deal: Finding a good deal on real estate can be quite a challenging task, and if you get one, it will be very rewarding, especially for someone with a bad credit history. When you purchase a home at a cheap price and get equity in the property, the loan officer will consider your bad credit home loan as a partially secured loan. Talk to a mortgage broker to know how these kinds of transactions will help you in getting approved for a home loan.

Investigate creative financing:
You need to be a little creative when you are shopping for a bad credit home loan. There are a variety of ways by which you can get approved for a bad credit home loan. Adjustable Rate Mortgage is one of the common ways by which people get approved for a home loan because their interest rates are quite low. Another way to get approved for a home loan is to involve the seller when you are applying for the loan. The seller can cover most part of the down payment on purchase. Or you can ask the seller to carry back a second mortgage that you repay back to them at a very low interest rate. These creative techniques will help you get an extra $10,000 while applying for the loan with bad credit.

Always believe in a down payment:
prefer to make a down payment of at least 3% – 5% of the loan amount. Of course, the more you can put in a down payment, you will be paying less in interests on the remaining balance. A drop of 2% in the interest rate on a $150,000 loan can save you over $72,000 in interest over the course of a 30 year loan. Plus you borrow a less amount in financing. If required, wait for some months so that you can build up more funds to make a down payment to the loan company.

Shop around with different companies:
always shop with different lenders while you are applying for a home loan. The interests and fees may vary with different lenders. The mortgage brokers will try to convince you that their skill and experience in the market has helped many people in need of home loans and they are going to help you too. Don’t be carried away by their words if they say that no one else is going to offer you a better deal than them, especially when you are having bad credit. Browse through the internet and you will find so many lenders in your area offering lucrative deals. An online mortgage specialist is often the best person to contact to get home loans for people with bad credit.

Improve your credit scores:
While your credit is already bad, you may find out different ways to boost up your credit ratings. Review your latest credit report and go through all the items reported on your copy. You may find out some inaccurate items on your file that should be immediately disputed. Once the incorrect items are removed from your credit report, your credit scores will go up. Then you can contact the other creditors to whom you owe a balance and work out payment arrangements.

Bad credit doesn’t have to stop you from getting a mortgage even if it does make it more expensive. Home loans for people with bad credit are available from a variety of lenders who specialize in bad credit home loans. They can make it easy for you to finance your perfect home.