Mortgage : Home Loans : Refinance : Home Equity Loans

By Jane Hale

Many people are eager to purchase their first home. However, because of soaring home prices, accompanied with rising interest rates, this dream is not a reality for some families. Nonetheless, people continue to buy homes. If buying a new home in the state of Arkansas, buyers must remain on guard, and avoid common pitfalls associated with homeowners. Here are three things to watch out for when applying for a home loan.

Choosing the Wrong Home Loan

There are a lot of home loan programs available. Because of rising home costs, mortgage lenders have created new loans to increase affordability. Arkansas has one of the highest mortgage interest rates nationwide. For this reason, many borrowers are skipping fixed rate mortgages, and choosing adjustable rate mortgages or interest only loans. While these loans offer low monthly payments during the initial years, payments will increase in five to seven years. If a home buyer is unable to afford a higher payment, they risk foreclosure.

Mortgage Loans with High Fees

Ideally, home buyers attempt to acquire a low rate mortgage loan. If you have good credit, getting approved for a low rate is workable. On the contrary, persons with fair or bad credit will not qualify for low rates. Yet, having a poor credit history does not justify paying excessive fees and rates. Sadly, many mortgage lenders charge certain applicants extremely high rates. Because of limited options, these persons accept the loan, despite the higher rate.

There are ways to avoid excessive mortgage rates. If choosing a sub prime mortgage, comparing lenders is the best defense against dishonest practices. Moreover, buyers can take steps to improve their credit. This may involve delaying the buying process. However, once a buyer’s credit improves, they qualify for better rates, which can equal a lower and much affordable monthly payment.

Avoiding the Risk of Foreclosure

The medium home value in Arkansas is $72,000, which equals a monthly m!
ortgage
payment of approximately $600. Thus, it is possible for buyers with modest incomes to buy an affordable home. Of course, some home buyers are tempted to buy more expensive homes. To lower the chances of foreclosure, mortgage payments must not exceed 28% of one’s income.

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
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This entry was posted on Friday, October 20th, 2006 at 2:06 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.