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About
Home Loans
A
Home Purchase
 Loan You
Can Live
With
Prequalify
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Ready to think about applying for a home purchase
loan? There are many options to choose from, so think about several things
before deciding what's best for you.
• Get a loan you can afford
• Get a competitive
interest rate to save money over the long term
• Get a loan with terms that
make sense for your purchase
You can learn more about home purchase loans at our free homebuyer
training classes or by consulting
with a loan consultant. And check out the great home purchase
loan products from the Home Ownership Center.
Get a Loan You Can
Afford
As a general rule, your housing expenses should
not exceed 33 percent of your total monthly income. When considering a
home mortgage, you will want to look at your monthly payment and assess
your other monthly expenses to see if this formula makes sense for you.
Remember your monthly payment will include repayment of the loan, interest,
and often tax and insurance payments. If you need assistance determining
what you can afford each month, we suggest that you talk with or email
a loan Consultant at The Home Ownership Center to help you with
this process.
 
Get a Competitive Interest Rate
to Save Money over the Long Term
Your interest rate will determine how much you pay over and above the actual
loan amount. In essence it is the price of the loan. So the lower the interest
rate, the lower the price of the loan, the lower the payments you will make
each month.
For example, imagine you want to buy a home for $100,000. You put 5 percent
or $5,000 down. This money may come partially from your own savings and
partially from a gift or grant.
After the down payment, your loan amount is $95,000 to be paid on a monthly
basis over the next thirty years. At an 8 percent rate your monthly payment
would be $697.00. At a 9 percent rate it would be $764.00. Over the life
of the loan, that one percent difference in your rate could save you $24,000.
Get a Loan with Terms that Make Sense
for Your Purchase
When you look at the terms of your loan, you
are deciding things like how many years you have to pay the loan back,
whether you make the same payment each month or if the payments change,
and what interest rate you'll pay.
A fixed rate mortgage means your interest rate will not change over the
life of the loan, and you will make the same monthly payment each month.
Typical terms for a fixed rate home purchase loan are either fifteen years
or thirty years, meaning you pay back the loan on a monthly basis over
this period of time. If you pay the loan back over fifteen years, your
monthly payments will be higher than if you pay the loan back over thirty
years.
If you sell your home before the terms of the loan expire, you must pay
the remaining balance of the loan. So part of the money the new home owner
pays you will go to the lender. If you have been paying more each month,
like in a fifteen year loan, you will owe the lender less when it comes
time to repay the loan.
Whether it is worth doing that or not depends on how long you plan to
live in your home and whether you anticipate the value of your home will
increase. A loan consultant can help you determine which option is better
for you.
There are also what's called adjustable rate mortgages in which the interest
rate you pay varies according to a pre-established index. For example, in
some adjustable rate mortgages your interest rate changes with the prime
rate. If the prime rate goes higher, so does your interest rate, so does
your monthly payment. At The Home Ownership Center, we have found that adjustable
rate mortgages do not meet the needs of our customers, so we only offer
fixed rate loans, but we'd be happy to talk with you more so you can figure
out which option is better for you. |
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