3 Things To Compare When Shopping For A Home Loan

Getting a home loan can be a tricky process that can take time and effort. If you want to buy a house and get the best loan possible for your situation, you may want to start looking into your options. As you do this, here are three important things to compare with the loan offers you receive from various lenders.

The Interest Rate

The number one thing to look for in a home loan is the interest rate. This rate will not only affect how much you pay in all for your home, but it will also affect your monthly payments. If you look around at home loans, you may notice that rates are lower when you take shorter-term loans. While getting a lower rate with a shorter-term loan may appear like a great option, you should also consider that the payments will be higher simply because you are repaying the loan in a shorter amount of time.

The Down Payment

A second factor to compare when looking at home loans is the required down payment amount. Any type of home loan you get will most likely require a down payment, but the amount needed can vary. The lowest amount you may see is with a Federal Housing Administration (FHA) loan. FHA loans require a down payment of only 3.5% of the purchase price of the home. Other loan packages will require higher down payments, and many even require a down payment of 20% of the purchase price of the home.

The Additional Clauses

Finally, you should also take into consideration any special clauses of home loans offered to you, and the main one to look for is a prepayment penalty clause. A prepayment penalty clause is something found on certain home loans, and it can be designed to discourage homeowners from paying off their homes in full.

With this clause, you will encounter a penalty if you pay off your home loan in full. This means that if you sell your house, you will have to pay an extra fee. This also means that if you refinance your loan, you will also have to pay an extra fee. If you plan on living in the house you buy for a short amount of time, you should avoid choosing a loan that has this particular clause.

Buying a house is a big deal and getting a good loan is important. To learn more about home loan options for your situation, contact a mortgage lender today. Talk to a bank, like MCS Bank, about your first-time home buyer loan options.