Obtaining a Mortgage

For many, the American dream begins and ends with the
purchase of their very first home. But, unless your name is
"Trump" or "Gates," you will most likely not be able to put
down all the money required to purchase your first home. So,
you will need to get a home loan - or mortgage - in order to
move into your dream home. But getting a home mortgage can
be a daunting task.

Basically, a home mortgage is an agreement you sign with a
bank or lending intitution that says you will pay them a
certain amount of interest on top of the purchase price over
a certain period of time if they lend you the money. Your
mortgage is secured against the property you will be
purchasing so if you default, the bank will become the owner
of the property.

Most likely, you are familiar with interest rates from your
credit cards or perhaps a personal loan or car loan. The
good news is that a home mortgage usually carries a much
lower interest rate than credit cards or personal loans.
This is because a home mortgage is for a much larger sum,
and the loan is paid off over a longer period of time, which
means the banks get a steady stream of income. Payments are
generally monthly, and the repayment timeframe will be from
10 to 30 years.

There are two major types of home loans in America now, with
a third type becoming more popular in recent years. The
first type of loan is the fixed home loan which allows you
to borrow the money at a specified or fixed rate of interest
for a specific numbers of years. Many borrowers sign up for
this loan because in doing so they avoid the risk of having
to incur extra expenses if home loan interest rates should
fluctuate.

The next type of home mortgage is a variable-rate mortgage.
With a variable-rate loan, the interest rate of the mortgage
changes with the interest rate available to everyone. The
rate is tied to the prime rate determined by the Federal
Reserve, and your bank may change the rate on these types of
loans based on the prime rate. When rates turn downwards,
variable rate loans are great. When the rates go up,
though, many borrowers on tight budgets must scramble to
try and pay their monthly mortgage.

The third loan, which is becoming more popular in America
is the bad credit type loan otherwise known as the low doc
loan. Bad credit or low doc home loans may sometimes be
slightly more expensive in terms of setup or maintenance fee
and usually attract a high rate of interest over the course
of the loan. This offsets the lenders increased risk at the
borrower having a poor or indeed no credit history and
possibly defaulting on the payments after getting the
mortgage. These loans are particularly popular with people
who have a bad credit history, people who have low incomes
including those who receive social welfare payments and
people who are self employed.

But, no matter what type of credit you have, there is most
likely a home mortgage that is available to you. So keep
trying and get into your dream home now!