Home Loans: How to Decide Which One is Best for You

Fixed Rate Home Loans

Home Loans:

When you take out a home loan in there are certain loan types which you should be aware of. Avoid costly mistakes by being an informed home buyer. Home loans are the way most people purchase their homes today. It allows you to finance your home over a period of years. The period of time that you finance your home loan for seriously affects the overall cost that you pay for the home.

Most people choose 30 year loans. There are many options in the time that the borrower has to repay the loan. Depending on which loan type that you choose, you can end up paying various amounts of money for your home. When money is tight you really need to pay close attention to these aspects of home loans.

No matter what you financial situation is, you want to save all of the money that you can on your home purchase. Various types of loans can seriously affect how much you end of paying for your home. Here is some information regarding choosing the right home loan for you. If you know the facts prior to making your purchase, you can save enough money to improve your home and make money when you sell to someone else.

Fixed home loans:

Fixed home loans are one option when you choose a home loan. Fixed home loans offer you the ability to lock in the interest rate of your home loan. That can be really important when you look at the volatility of the housing market over a period of time. When you need a home loan you want to get the very best interest rate that you can. If you know how, that can be very simple. As home loan borrowers you know that they are different types of loans. So what are fixed home loans? They are loans that remain at the same interest rate for a period of time. You can get these loans at any lending institution that offers home loans at a fixed rate. This is generally a period of five years.

After the five years are up the borrower can choose which rate they wish to have the life of their loan switched to. When it switches to that rate the borrower no longer has a fixed rate home loan.

The drawbacks of this type of loan is the fact of the variable rates of the economy. If the variable rates drop then the borrower must remain paying for the five year period at the same rate. The borrower misses out on the savings of the market rate drop. Another problem with this loan type is the fact that you can not repay the loan early without paying a penalty.

How to compare home loans:

If you wonder how to compare home loans, you are not alone. While the lenders understand the process; if you do not understand the process, you can loose significant money. You have some options when it comes time to compare home loans. If you are a first time home buyer you can get a government grant towards the purchase of your first home. This only applies to low income home buyers that are buying their first home.

Everyone else has to consider the options that are available based on their credit and amount of money that is liquid at the time of purchase. If you are able, putting more money down at the time of purchase is the best option. It allows you to pay less over the course of the loan.

Top 10 Tips to getting a home loan:

  1. Know the market well:

If you know the market well locally, you can understand which loan to choose for your situation. The lender doesn’t want you to know that information because it means that they could loose money.

  1. Know your credit well:

If you understand your credit situation, you can be prepared for anything that the lender may try to hit you with.

  1. Know your special circumstances:

Know about any special discounts which may apply to your home loan application. In many cases, your circumstances help your current home loan application.
4. Choose a home loan type:

Be sure to choose the type of home loan that you need prior to applying. Fixed rate, variable rate and many other types of home loans can really help you save money.

  1. Know your current financial needs:

Depending on what your current financial situation is, you can decide on different types of loan terms.

  1. Understand what the purpose of the home purchase is:

Investment is very different from long term home ownership. Get the right loan for your situation.

  1. Know the value of the home before applying for the loan:

Some people apply for a home loan before choosing a home. That is a tragic mistake. Various homes can be beneficially affected by various home loan types. Pick the house out first and then get your home loan.

  1. Know the laws:
  2. Know the lender:

Research the lender that you use for your home loan prior to application.

  1. Take action when it is time:

Be sure to get everything in on time in order to avoid costly mistakes during the process.

How to get a home loan:

When you are ready to shop for a home loan be sure to understand what is expected. Be sure to have a professional evaluate your particular home loan needs. Specialists can offer you the best option is saving money on your home loans.

Have all of your legal documents in order. Various lenders may require several legal documents while getting your home loan approved. Be sure to have access to all of your credit and banking documents. Tax documents are generally required as well. Some lenders may simply enter your information for you based on your name and number. Just be aware that that you need to understand what your particular fanatical situation is prior to applying for your any home loans.

Have your money for your down payment ready to go. Having this available allows you to apply at lower interest rates. It also allows you to have to finance less of a loan amount. That can equal serious savings to you over the life of your loan. So be prepared.

Lastly, ensure that you fully understand the loan terms that you are agreeing to. Once the documents are signed you are legally obligated to hold to them. While you might be able to change the interest rates and make payments at an acerbated rate, you can often not change your home loan in once you sign.

Income Tax Refund Anticipation Loans: What You Don’t Know

You’ve gathered all your paperwork and made an appointment with Happy Times Tax Preparers. You chose them because they promised to give you an instant loan based on your tax refund. After the paperwork is done your told that you have a tax refund of $3,500.00. The happy Times tax preparer offers you a Refund Anticipation Loan ( RAL ). “Great!”, you say, “Where do I sign?” Before you do, read on.

According to an annual report issued by the National Consumer Law Center, and the Consumer Federation of America, using data collected from the IRS for the tax year 2016, RALs collected $833 million dollars in loan fees and an additional $68 million in other fees. In a companion report the NCLC and the CFA said that RALs provide tax preparers with an incentive to inflate refunds and commit tax fraud. “Not only do RALs siphon off hundreds of millions from the hard-earned tax refunds of American taxpayers, they also undermine the integrity of our tax system,” said Chi Chi Wu, NCLC Staff Attorney.

Let’s take a closer look at RALs. An RAL is a bank loan secured by the taxpayer’s expected refund. Now, these loans only last about two weeks which is when the IRS refund pays the loan off. The fact that the loan only last two weeks or so is a good indication of how needless this type of loan is. If the taxpayer could be a little patient, in two weeks they would have their money without the cost of a loan.

A typical RAL loan fee ranges from a low of $34 to a high of $130, usually covered as an “Account Fee” or a “Bank Fee”. Then there’s the host of other, so called, “Add-on Fees”, that the freelance tax preparer might factor in. Fees with names like “application,” “administrative,” “e-filing,” “service bureau,” “transmission,” and “processing” fees. Add-on fees start at about $25 and move up from there into several hundred dollars. These types of fees are not charged by the big chains like H&R Block, Liberty tax or Jackson Hewitt.

Let’s talk interest rates. According to the NCLC and the CFA, the annual interest rate (APR) for an RAL could range from 50% to an astonishing %500. Tack on a $40 Add-on fee that may be included in the interest rate calculation and you’re looking at an interest rate of 85% to 1,300%. While independent tax preparer’s RAL interest rates are high , companies like JPMorgan Chase or H&R Block usually offer lower rates somewhere in the neighborhood of 36%. There can still be what is called, a “Refund Account” fee which is defined as the cost of a temporary account that has to be set up so the taxpayer’s refund can repay the loan. If that fee is included in the APR calculations the interest rate could more than double.

Organizations like the NCLC and the CFA believe that the financial incentives for RALs promote the existence of fringe tax preparers. Their joint report cites dozens of examples of criminal tax fraud cases involving RALs.