Getting a Real Estate Loan ImageBuying a home usually means you need to get a real estate loan to finance the property. In order to get the right type of loan, you first must understand the details of each one.

When you get this information, you and your other half can sit down and evaluate how well each one fits your current financial circumstances. It will also help you understand the various documents you receive from loan officers advertising their services.

What is Negative Amortization?

One of the first types of mortgage loans is known as negative amortization and this includes payments that increase as the year goes by. The payments are so low that your interest is not paid along the way, and this balance will be owed at the end of the loan period.

If you are expecting a financial boon at a later date, this could help you pay this balance. In the meantime, you won’t have to worry about the low payments you have agreed to in the beginning of the year.

How Does a Fixed Rate Plan Work?

Another type of mortgage is known as a fixed rate plan. This gives the home buyer a consistent amount to pay each time and you can plan your budget more efficiently. Depending on the time period you have chosen, whether this is 15 years, 30 years or a much shorter time length, the payments will be consistent and help you pay the loan off by the due date.

What’s the Difference Between Adjustable and Fixed Rate Mortgages?

Mortgages that offer adjustable rates will have payments that change throughout the agreed-to time period. These are based on other factors besides your current loan details and you can discuss this with the real estate loan officer at your bank. Find out what the range could be though so you have an idea of the loan payment before you receive the bill.

Once you understand all of these mortgage plans, then you’ll make a more efficient decision. It will also help you have a productive conversation with the loan officer at your consultation appointment. Of course, they will likely have some recommendations for you as well based on their previous experiences with clients.

By evaluating your current budget and thinking about your future income possibilities, you’ll be able to make a tentative choice before you arrive. Using these real estate loan tools is something you can do at any time of the day and it will help you prepare for these important meetings.

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This is filed under Home Buying.

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