What to Look For in a Home Loan

The old adage holds true: If it appears too good to be true, than it probably is. It is important to remember this when shopping for a home loan. This is a task that should never be taken lightly. It is important to work with someone you trust, ask questions, and most certainly read through everything.

A few things to look for when actually inquiring about different home loans are as follows.

Is there a prepayment penalty? Make sure you apply for one that has no prepayment penalty, or at least be aware if your loan does. While they have become less common, sometimes they still manage to sneak in to a contract. Having a prepayment penalty would discourage someone from paying off their home loan early. Large fees can be added for this if you are unaware of a prepayment penalty. These penalties can also affect you if you refinance later on to make improvements to your property.

Watch for loan fees. It is best to try and negotiate loan fees as sometimes there are many that are not needed. Higher loan fees can be worth it if the interest rate is significantly lower or if there are other loan incentives that might make it appealing. But for the most part, avoiding some obsessive loan fees and negotiating them are a better way to go.

Find out what Appraisal and Inspection fees are going to be. These are almost always required when getting a first mortgage.

Mortgage points are fees paid by you that will lower your interest rate. Most often times, cash needs to be paid upfront for a certain percentage of your mortgage. If there is a chance that you can pay off or refinance the loan in a few years time, you are probably better off looking into a mortgage with no mortgage points.

Compare every type of loan and even loan offers you may receive. Some may have a higher interest rate while others may have high loan fees but better loan terms. Also, if you are a veteran in the armed forces, look into and take advantage of veteran loans that might be offered in your area.

Valley Capital Investments, LLC is your source for VA Loans and Veteran Loans. Heidi Ball is a freelance writer.
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