Here are the top ten crucial factors to consider when choosing home loans:

1) How much is the down payment? Mortgage loan lenders usually ask for at least 10% down payment. If you can save up for more, putting down at least 20% on your loan can significantly lower down your monthly rate.

2) What type of interest rate? Different home loan terms make use of different rates. The two basic options are fixed-rate and variable-rate loans. A fixed-rate loan imposes permanent rates on your loan while variable-rate loans can change depending on the market index. Variable-rate loans involve more risk because you’ll never know when and how much the rates will increase.

3) How much is the APR? When comparing lenders, check out the home loan formula based on the annual percentage rate (APR). The APR includes not just the interest but other costs of your loan such as points, origination fee, insurance, etc.

4) How long is your loan term? A mortgage loan may be a 30-year fixed, 15-year fixed, and a combination of fixed and variable interest. The first part of your loan term may start with a fixed rate then change into a variable rate loan after a certain period. Ideally, long-term loans enable you more savings but a short-term loan can also be a practical choice if you don’t have plans of staying in your home for a long time.

5) How much loan can you afford? Calculate how much loan you can afford by considering your monthly income, your expenses, savings and your debts against your home loan.

6) How is your credit history? The status of your credit history affects the rates of your loan. The higher your credit score is, the more you can expect to get good loan rates.

7) How many points will you pay? A point is equivalent to 1% of your total loan’s value. These are tax deductible and some lenders will lower your loan rate depending on the number of points you pay.

8) What are sub-prime loans? These types of loans are especially designed for people with bad credit. Since they are considered as high-risk borrowers, lenders would impose higher rates on their loans. Still, it is possible to obtain the best sub-prime loan in the market if you do your research.

9) Is there a pre-payment penalty? Lenders usually charge a pre-payment penalty if you wish to make an advance payment on your loan. This is because the sooner you get off from your loan, the less interest you’ll pay, which means less profit for your lender. Don’t forget to inquire exactly how much is the pre-payment penalty before signing your loan.

10) What are the provisions of the loan? Will you be able to acquire easier repayment terms in cause of job loss or illness? Make sure that your lender has provisions for borrowers who are in financial trouble and who want to save their home.

About the Author
Liz Roberts is a loan consultant with NewHorizon
Finance and has been providing consumers and business owners with financing since
1989. Join our mailing list for
>FREE tips on building and repairing your credit . We also have a list of recommended
bad credit credit cards
Copyright 2007

Information in these articles is brought to you by www.newhorizon.org. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles.

About Melanie Mathis

Melanie Mathis is a credit analyst and a writer for 8 years. She has been participating in the programs of NHBS, Inc such as their continuous effort in giving out Free Credit Repair and Building Ebook. Connect with Melanie Mathis on Google+