A Guide to Home Loan Lending

Home loan lending can be very confusing, both for first time home buyers and seasoned buyers alike. Almost no one buys a home without a mortgage, which means you are likely going to have to master an understanding of home loan lending if you ever want to achieve the American dream of becoming a home owner.

Types of Home Loan Lending Options

When it comes time to getting a mortgage, you have a wide array of options to choose from- depending largely on your risk tolerance. For example:

• A 30 year fixed rate mortgage has been the standard for a long time and is very safe. You have a fixed interest rate and your payments are set based on the premise that it will take 30 years to pay off the house. No change occurs to your monthly payment amount over the entire 30 year period and, at the end, your loan is paid off.
• A 15 year mortgage. These are very similar to 30 year mortgages, only your house is paid off faster. The interest rate is usually lower on a 15 year mortgage because the money is tied up for less time.
• An adjustable rate mortgage. These may be for 5 years (a 5/1 ARM) or 7 years or any specified duration of time. You will be offered a promotional interest rate that is usually quite low (lower than a 30 year mortgage) and that is locked in for a set time. After the rate lock expires, your interest rate will fluctuate according to whatever index it is tied to.

To qualify for any type of mortgage, you will have to prove you have the income to pay for it. You'll also need to have decent credit, as the bank will run a credit check. A down payment (a cash deposit on the house) may also be required.

Getting Help

To better understand your options for home loans, you should consult with an experienced real estate attorney. He can explain home loan lending to you and can assist you in making sure that your loan documents and agreement are fair and won't create financial problems for you.