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What You Need to Know Before Applying a Home Mortgage Loan?

Buying a home is one of the most important financial commitments you will make in your lifetime. A home can be both a great place to live and a great investment, but it is important to shop around for the best mortgage loan. Getting a great deal on your mortgage can save you thousands or even tens of thousands of dollars over the life of the mortgage loan. There are few key aspects any potential home buyer should be aware of before applying for a home mortgage loan.

One of the first decisions any home buyer will need to make is whether to choose a type of home mortgage loan rate. There are various types of mortgage loan rate available in the loan market, such as fixed rate mortgage, and adjustable or variable rate mortgage, a two-step loan, and FHA mortgage, or a balloon or reset mortgage. All of these types of loans have their place, but it is important to find the best home mortgage loan for your needs.

Select a type of mortgage loan rate

When many people think of mortgage loans, they think first of the 15 or 30-year fixed rate mortgage loan. With this type of mortgage loan, the payments are fixed for the length of the loan. You pay the same monthly mortgage payment from the first month to the last month of the loan. The interest rate is fixed and does not rise or fall with economic conditions.

An adjustable rate mortgage, also known as a variable rate mortgage, on the other hand, features an interest rate that rises or falls along with the direction of interest rates. Of course, when the interest rate rises or falls, your monthly mortgage payment will rise or fall right along with it. It is important to understand that your monthly payment could potentially rise if interest rates go up. Any time you consider a variable rate mortgage, it is important to calculate what the monthly payment would be if the interest rate were to rise to its highest possible level.

Any time you shop for a loan it is important to monitor the direction of interest rates to find the best time to take out the loan. This strategy is doubly important when seeking a mortgage loan. Tracking the direction of mortgage interest rates will help you find the best time to lock in the interest rate on your mortgage loan.

Get pre-approved on the home mortgage loan

It is also a good idea to get yourself pre-approved before shopping for a home. Getting pre-approved on the mortgage will make the entire home buying process much smoother and easier. The real estate agents will be more willing to show you the properties you want to see, and the sellers will take you much more seriously, if you have a pre-approval letter in your possession when you place your offer.

Consider higher mortgage down payment

Of course, the down payment on a home is a very important part of the mortgage loan. It is always a good idea to make the highest possible down payment when purchasing a home. The higher the down payment, the lower your monthly payments will be and the less you will have to borrow. Making a larger down payment also means that you will pay less for the home in the long run. Remember that you will be paying interest on the entire amount you borrow, and the more you borrow the more interest you will be paying.

Another reason to muster a down payment of at least 20% is to avoid the private mortgage insurance required for down payments of less than 20%. Private mortgage insurance is designed to protect the lender in the event of a default by the buyer, and a down payment of 20% allows the buyer to avoid purchasing this costly insurance.

Choose a mortgage loan company carefully

It is also important to choose your mortgage lender carefully and get any promises in writing. Beware of any lender who offers to complete the loan paperwork for you or gives you blank forms to sign. Be sure you have all the facts and loan conditions at your disposal before you sign any paperwork. Shopping around at different lenders will help you find the best mortgage loan package for your needs.

No matter where you get your mortgage loan financing, making the move from renter to homeowner is an important decision. Home ownership rates are at historic highs, and home prices continue to appreciate at an excellent rate year after year. A home remains a great investment, and getting the very best deal will allow you to make the most of your most important asset – your own home.

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Quicken Loans Inc. is the nation’s largest online retail mortgage lender and among the five largest overall retail home lenders in the United States. The company closed a record $30 billion in retail home loan volume across all states in 2011. Quicken Loans ranked #1 in customer satisfaction among all home mortgage originators in the United States by J.D. Power and Associates in 2010 and 2011.

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