It has been quiet confusing scenario these days when you go for a mortgage loan. Lenders give you a variety of options regarding your mortgage loan and you are not very sure where to start and what to choose. Mortgage loans also vary from State to State. Different States have their own rules for the mortgage loan applied. In this article I have discussed the 3 types of mortgage loans that are generally offered by most lenders in America today.
Fixed Mortgage Loan
These type of loans are the most common and popular type of mortgage loans. In this you take a loan from a lender and pay him a certain repayment over a fixed time period. People generally go for long term of 30 year fixed mortgage loans as the monthly repayment are low enough and also the interest rates events out in this long period. But the disadvantage is that, in the long run of 30 years you have to make more repayment than the others who take it for a short period.
Convertible Loans
Convertible loans have become popular as it gives the mortgage loan borrower more flexibility over their loans. At any time if it seems to you that the interest rates are high then you can get converted into fixed mortgage loan. If interests are low then you can get converted to ARM based mortgage loans. The most common example of convertible loan is Balloon Loan. It is basically a fixed rate convertible loan where you repay small monthly amounts over a period of 5 – 7 years. After this period you need to repay the loan amount in one go. The advantage is for the real estate investors who want to sell the house in a short period of time to make money.
Special Mortgage Loans
These mortgage loans are categorized according to different groups of people, such as FHA mortgage loans are to those who go for first time home buying or for people with bad credit history. Another is veteran affairs mortgage loan which are offered to widows of the US armed forces.
We all know that having a good credit score is very important to get any type of secured mortgage loans. The lender checks the borrowers credit report to check the borrowers credit affordability. If you have better score then you can get approve the loan with better rates and terms. So all of us try to improve our credit score or keep it in a better condition but do we all know what are things that affect our credit score badly? If we can avoid those things then we can have fairly credit.
- Defaulting in Payments: The first and fore most thing is defaulting on monthly mortgage payment. If you default on your mortgage payments or any other payments, that shows a negative impact on the credit report. So it is better to pay all the bills on time and if you can make payment of your bills that has certainly have good impact on the credit score and helps to improve.
- Regular Late Payments: We have already discussed that late payment a huge negative effects on the credit report and if someone makes constant late payments then his credit score is bound to go down.
- Charge Off: Some times borrowers are unable to make some payment and the lender charge off the due amount but this actually have huge negative impact on the credit report. If the person does not make payment on the charge off amount then sometimes other lenders do not want to give a new loan as they may think that the person will not be able to pay off.
- Closing down Old Accounts: Do not close your old credit card accounts and if you close your credit card account with some due balance then it will have massive negative impact.
- Judgment against you: If you credit report shows any judgment against you that means you have not pay off your bills and the lender has taken help of the Court against you. This also effect your credit score badly.
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How long after foreclosure can I purchase a home?
Foreclosure affects your credit heavily and it stays on your credit for 7 to 10 years but you can be able to perchance a new home sooner that that time mentioned above. But how soon can you get the new mortgage will depend upon how well and how soon can your improve your credit score. The sooner you improve your credit score the sooner you will get approve for your new mortgage loan.
It is a fact that foreclosures have so many negative affects on your credit score and if you have numerous negative items on your credit score like charge off, delinquent payments, collection accounts then it may take you many years to get approve for a new mortgage loan. But if the foreclosure do not affects your credit heavily and you can make a huge down payment then you may be able to get approve for the mortgage loan.
The thing is that after the foreclosure you need to do a lot of planning and research to become a home owner again. You should try to make a lot of savings too. So savings and improving the credit should be in the first priority to purchase a home after the foreclosure. You should consult with a financial consultant to know how should you proceed in this regard so that he can help you in the right direction.