How to Find an Affordable Mortgage Loan
Choosing Alternative Home Loans and Mortgage Lenders
Apr 17, 2009
Homeowners looking for affordable mortgage loans need to have realistic expectations before they approach a mortgage lender. Online home ownership and mortgage calculators can give homeowners a rough idea of how much they can afford to spend on a home. As many homeowners have learned, it is a good idea to stay within a reasonable budget when taking out a home loan.
Mortgage Information for Homeowners
Traditional mortgages require monthly payments on both principal and interest, while alternative mortgages such as interest-only and payment-option adjustable rate mortgages allow for lower payments initially. While the low monthly payments of some alternative mortgages can be beneficial for some homeowners, they may also tempt a home buyer into choosing a larger home loan than necessary. The Federal Reserve Board advises against doing this. The entire home loan needs to be paid back eventually, and a homeowner unable to make payments on a large mortgage may face foreclosure.
On the other hand, traditional mortgages can be too expensive for some homeowners. What should a potential homebuyer do? The Federal Reserve Board recommends homeowners consider either a fixed rate mortgage or a fully amortized adjustable rate mortgage and negotiate to get the best terms possible. “Shop around for terms and features that fit your needs and your budget,” they advise in their 2007 report "Are They For You? Interest-Only Mortgage Payments and Payment-Option ARMs".
Mortgage Lenders – Credit Unions, Community Banks and Insured Home Loans
If the big banks aren’t able to provide an affordable mortgage loan, a homeowner has more options. Most credit unions and community banks have not been damaged in the housing crisis the way major banks and investors have, and may be willing to negotiate on home loans.
The US Dept. of Housing and Urban Development has a network of certified mortgage lenders that offer qualified homeowners insured, fixed-rate loans. “FHA-insured loans are low risk and have traditionally been an inroad for first-time buyers and others for whom home ownership might not otherwise have been an option,” writes Joe Mahon of the Minneapolis Reserve Bank in his January, 2009 article "Home to Roost".
More Tips on Affordable Mortgage Loans
According to the FRB, homeowners can also do their part to ensure getting the best home loan possible by doing the following:
- Saving up for the largest down payment possible, to cut down on the size of the loan needed.
- Looking for the least expensive home possible. Once equity is built up, a homeowner can sell and buy a more expensive home.
- Looking for community housing programs that offer lower interest rates or reduced fees for first-time homebuyers.
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