Affordable Home Loans

From the Superpages.com

When you fall in love with the perfect house, it’s easy to justify spending more than you should. Although there is a limit to how much your mortgage can ease the burden, certain types of home loans can help. Whether down payment or monthly cost is your concern, there’s a mortgage waiting for you.

Down Payments

A good rule of thumb is to have cash equal to 20 percent of the sales price to put down on your mortgage. If you don’t have access to as much cash as you need for a down payment of that size, look for home loans that feature higher loan to value ratios. Looking into this type of loan even when you have the full down payment is still a good idea. Closing costs are usually upwards of three percent of the mortgage and can require thousands of dollars in addition to the down payment.

A drawback of these popular home loans is that the lender will require you to carry private mortgage insurance as part of the loan. Depending on the size of your mortgage, this can add more than $100 to your monthly mortgage payment. When you will exceed 80 percent by a few percentage points, consider postponing your home purchase until you have the difference.

Monthly Payments

In the end, your ability to pay your mortgage each month is the largest factor of affordable home loans. As you know, failure to do so will result in foreclosure and negative credit reports. Look for mortgage options that provide the lowest payments, even if they do not have the lowest interest rate.

The 30-year fixed rate mortgage is still a popular choice among home loans because of the flexibility it offers. Most lenders will allow you to pay off the loan as early as you like, while giving you the lower payments that come with an extended loan term. Remember that you can shave years off your loan by making a single extra payment each year.

Interest-only home loans provide another potential option for keeping your payments low. As you can infer from the name, this mortgage does not require you to pay towards the principle each month, just the interest. If the lender offers you a fixed interest rate, your payment will not change unless you decide to pay extra towards the principle. Although this option provides low payments, keep in mind that you must repay your principle balance at some point if you ever hope to own the home free and clear.