After 10 years of marriage, I’m still enjoying living in the first home I moved into with my husband. Buying a first home can be one of the most exciting events in a person’s life. Before making this important expenditure, people need to first sit down and determine how they will successfully finance it. After all, a home will likely be the most expensive purchase you make in your life. Talk to a loan officer and determine how much money you can reasonably borrow. Then, decide how much money you want to use as a down payment. You also must decide how many years you will finance your home for. On this blog, you will learn about the process of buying a first home with a loan.
If you are in need of some extra cash to buy a house, one way to do it is to visit a loan lender and request a residential loan. The process involves applying for a loan and stating your needs, and after the lender looks over your financial history, they will decide to approve or decline your loan. That said, all loans are not created equally, with there being different loan terms assigned to a loan based on its purpose and your credit history. Here are two things to look out for when applying.
Many lenders will charge you a fee simply for getting a loan from them. These fees are often referred to as annual or origination fees. Be aware that these types of fees aren't part of the interest you pay on the loan, but an additional charge that the lender makes as part of the loan process.
It doesn't matter how what your lender calls this fee since you just need to be aware of them when comparing loans between different lenders. Fees only increase the total amount you owe and must be considered just as much as the interest rate. Too many fees can be a reason to walk away and visit another lender. You could also request that fees be waived and see what the lender says, since you may be surprised at how negotiable they are.
Early Payment Penalties
Another type of fee that you could end up paying is an early payment penalty. Your loan will have an assigned length, with an amortization schedule that defines how much interest is paid each month. If you get a sudden windfall of cash, you may be tempted to pay off the loan early and avoid the interest owed in the remaining time of the loan. However, be aware that some loans will assess an early payment penalty if you do pay off the loan early. This helps the lender make money off a loan that someone only needs for a couple months.
If you feel like you are going to be paying off the loan before the original term is up, know if the loan has a penalty for early payment.
These are just a couple things to watch out for when getting a loan from a local lender. If you have questions about any fees that could be associated with the loan, be sure to ask your loan officer prior to finalizing all the paperwork.