Home Loan Mistakes To Avoid

When you are planning to buy a home, you may be afflicted by a number or questions. The investment is huge and requires careful planning as well as deliberation before applying for a loan. A knowledge of various home loan terms and documentation involved will help you handle the process in an efficient manner. Here are some mistakes that you should avoid while getting a home loan:

• Not taking a pre-approval: It is in your best interest to have a pre-approved loan before you begin your search for the home. It helps you decide a budget so that you can shortlist properties according to that amount. The credit union will evaluate your financial position and approve a specific loan amount accordingly.
• Not keeping credit score under check: It makes a lot of difference if you have made all your bill and loan payments on time to maintain a good credit rating. This will affect your monthly premiums and the pre-approved amount. Hence, before you apply for a home loan pre-approval, make sure you work towards improving your credit score.
• Ignoring other costs: Many people make the mistake of considering the actual property price as the only cost involved in buying a home. There are many other expenses that you may have to incur, such as loan paperwork, property tax, homeowner’s insurance etc. These must also be taken into account to decide if you can afford the home.
• Not saving enough: Making a good down payment will lower your monthly payouts towards the home loan. This means that you must start saving in advance. The lesser amount you borrow from the credit union, lower will be interest payments.
• Not knowing repayment strategies: Ask about the loan repayment options offered by the credit union. You may want to skip a payment during some financial crisis. Conversely, you may be able to pay off the entire amount ahead of the loan tenure. Make sure the home loan plans has flexible terms and conditions so you reduce your liabilities as soon as possible.
• Not reading the application forms: Relying on verbal agreements and ignoring the need to read the loan documents can prove fatal. You must take the time out to go through all the paperwork carefully before signing. Cross check the duration of the loan, interest rate, mode of payment and other terms to avoid any hassles.

Getting a home loan from a credit union is an easy and smooth process union as the staff periodically informs the members about all the financial tools available. The personalized services offered at these financial institutions ensure that you get the required loan amount at the best possible rate.

Co-Signing An Auto Loan: Pros & Cons

Getting an auto loan can be difficult for those with no credit history. Co-signing is one way to get a loan as it involves a second party (usually a family member or friend) who signs the papers along with you. This assures the lender about your ability to repay the money, thus, the chances of loan approval may increase manifold.

The pros of co-signing:

• Faster loan approval: Since the co-signer is essentially vouching that he will pay off your debt in case you falter, his credit rating ensures you get an approval on your loan faster.
• Better interest rates: In case the borrower has low income, he may end up paying a higher interest rate on the auto loan. To avoid this, he may look for a co-signer who is more eligible for approval so the interest rates can be lower.

The cons of co-signing:

• Risk for co-signer: In the event of the borrower defaulting, the co-signer becomes responsible for the payout of the pending loan amount.
• Risk for borrower: The loan’s interest rate depends on the co-signer’s financial condition. If you have found a co-signer who has a low income or unstable job, you may not gain the advantage of getting auto loan at a low interest rate.
• May strain relationships: Having someone co-sign your loan or being a co-signer yourself may have implications on personal relationships if things do not go as planned. Also(,) if you know you would not like to lend money to someone, do not get into co-signing a loan.
• Does affect your credit rating: If you are co-signing for someone, make sure you have set aside some money in case the loan burden falls on to you. If the borrower fails to pay and even you are not able to recompense the loan, it may have a negative impact on your credit rating.

Credit unions are a great place if you are looking for an affordable auto loan. These are non-profit organizations working solely for the benefit of the members. You can avail a loan at low interest rate and flexible repayment options. Moreover, the staff will also help you understand the loan process and complete the paperwork to ensure a quick approval.

Tips To Qualify For A Home Loan

Home loans are a convenient way of buying your dream property without any sort of financial encumbrances. Credit unions are member-owned corporative organizations that offer easy home loans to its members. The income requirement and loan conditions are also flexible at these institutions. Being non-profit organizations, the credit unions strive on helping the members take better decisions.

Here are some tips which can help you qualify for a home loan from a credit union:

• Meet The Loan Officer: Meeting the loan officer personally is a must to assess whether you are eligible to apply for a home loan. The loan officer is usually available at all branches of credit union to discuss the available financing plans and explain the application process to the clients.
• Required Documents: To qualify for the home loan, you need to provide certain documents to the loan officer in support of your gross monthly income, number of dependents, residence status, housing payment and child support obligations. Demographic information, which includes your address, contact numbers, place of employment, social security number etc. to apply for a home loan.
• Check Credit Rating: Your credit report is an important parameter that may be verified by the loan application officer.  Before approving the application, the officer may check your ability and willingness to repay the loan. Spend some time to improve your credit score by paying off all the mortgages and instalments on time.
• Evaluate Debt To Income (DTI) Ratio: It may be determined through a complete verification of gross income from all sources, debts, vehicle loans and other monthly obligations incurred by you. With this, the credit union may want to ascertain that you will be able to manage the monthly payments without any difficulty. The debt to income ratio will also help you determine the amount of home loan that you should apply for.

The decision to approve a home loan is taken by a loan review committee duly approved by the board of directors at the credit union. They work towards ensuring the best interests of the clients while at the same time, helping them fulfill financial liabilities. Make sure you carefully go through the application information so that you meet all the criteria and qualify for the home loan.

Common Loan Application Terms Defined

Applying for a loan requires considering many important factors such as interest rate, down payment, collateral etc. However, it is important to understand the common terminologies used in the process so that you are able to make an informed decision. Being aware of the jargons makes it easier to understand the terms and conditions mentioned in the loan agreement.

Here is a brief explanation of some of the most common loan application terms:

• Amount Requested: The amount of credit that is desired by the applicant.
• Amount Financed: The total loan amount that is granted by the credit union.
• Assets: Tangible or non-tangible items of economic value possessed by the applicant.
• Adjustable-Rate Mortgage (ARM): A loan amount with variable interest rate depending on the standard financial index.
• Annual Percentage Rate (APR): A method of calculating the cost of mortgage. It includes interest and mortgage insurance on an annual basis.
• Teaser Rate: An interest rate which is lower for the first few months and increases thereafter. A teaser rate is mostly offered to attract borrowers.
• Appraisal: A written report by an appraiser estimating the value of a property.
• Combined Loan-To-Value (CLTV): The ratio of the loan amount borrowed to the actual cash value of the item to be purchased.
• Collateral: Any item of economic value pledged as a security against the loan. Collateral can be confiscated by the lender in case the individual fails to repay the loan amount and interest.
• Closing Costs: The expenses incurred by buyer and seller of a property, when transferring ownership. These include attorney’s fee, taxes, escrow payments, title insurance etc.
• Gross Monthly Income: The total monthly income of an individual, excluding the taxes.
• Refinance: The procedure when the borrower pays off a loan amount from the proceeds of another.
• Fixed Rate Mortgage: A mortgage rate that remains unchanged throughout the duration of the loan.
• Net Monthly Income: The total income of a person after taxes and deductions.
• Prepayment Penalty: The fee amount charged to a borrower for paying a loan amount ahead of the payment schedule.
• Two-Step Mortgage: A loan procedure that includes a fixed rate and payment for a set period, followed by a variable interest rate for the rest of the loan term.

Make sure you have a complete understanding of these terms before applying for a loan. In case of any doubt, it is advisable to confirm the meaning of a particular term with the lender.

Questions To Ask Before Choosing A Credit Union

Selecting a credit union is an essential decision to ensure that you avail the maximum benefits of your membership. Various credit unions vary in interest rates offered to members, eligibility criteria to qualify as a member, types of accounts and fees. It is important to consider some important factors when choosing a credit union.

Here are some questions that you can ask before becoming a member of a credit union:

• Criteria For Membership: Inquire about the credit union requirements to assess that you are eligible for membership. You can visit the credit union branch or visit their website to find the basic criteria. The credit union may require some details to determine your eligibility such as your current employer, office details, housing details etc.
• Types Of Accounts And Services Available: You should make sure that the credit union offers the type of account that you require. You should discuss the types of accounts available with the representative and check out the services offered by the union.
• Amount Of Fees: It is crucial to ask the representative about any fee associated with the accounts or services that you need. You should also ask about any fee for opening checking or saving account, using ATMs, online banking, etc.
• Minimum Balance Requirement: Certain credit unions require you to keep a minimum balance in the account to avoid paying a fine. You should ask the representative about the minimum balance requirements before signing the documents.
• Online Banking: It is crucial to know if the credit union offers online services, as it will help you make any transactions and pay your bills conveniently from any location. You should inquire about the type of online services are offered by the credit union and the charges for those facilities.
• Credit Union Insurance: You must ask the credit union representative about the safety of your deposited money. Check out whether the credit union is insured by the NCUA (National Credit Union Association).
• Interest Rates: You should check out the interest rates on the deposited amount and interest rates for loans. You should choose a credit union that offers high rates of interest on the saving accounts and lower rates of interest on loans.

Asking the credit union representative the above-mentioned queries can assist in making a profitable and suitable decision. Selecting the right credit union is beneficial in making significant financial savings.

Things To Consider When Applying For Home Loans

Buying a home is the most valuable investment you make in your entire lifetime. It involves crucial decisions like finding your dream home, applying for loan to buy the house etc. While the other steps may depend upon your personal choices, arranging for home loan can be a tricky business. Here are a few things to consider when you apply for home loans.

• Check Your Eligibility: The amount of loan that the lender will sanction depends upon your income and past records of repaying loans. The lender would calculate your salary in order to know if you can spare the amount of the EMI at regular intervals. This determines if you are eligible to get the loan or not. When applying for loan, the amount of EMI that you are ready to pay should be clear in your mind. Your eligibility to get a home loan may also depend on the nature of your work and various other factors like your occupation, age etc.
• Loan Tenure: Tenure of loan refers to the time period that you get to repay loan. It is used to calculate the amount of EMI and is inversely proportionate to it. Longer the duration of the loan, lesser will be the EMI. Term of loan also affects the amount of interest paid and is directly proportionate to it. This means that interest is being paid on loan increases with growth in time. Before applying for a loan you should decide tenure maintaining balance between amount of EMI and interest paid.
• Interest Rate: There are two types of interest rates offered, fixed rate and floating rate. In fixed rate loans, the amount of interest remains the same which maintains the same EMI throughout the loan. However, in floating rate, the EMI changes with variation in the rate of interest. You should go for floating rate home loan if the interest rate on loans is likely to fall in the near future.
• Shortlist A Lender: With such a competitive market of lenders you must be careful while making the choice of a financial institution. Shortlist a number of lenders based on their reputation and goodwill. Check customers’ reviews and also inquire about the extra services provided by lenders. Compare the interest rates and loan tenure that they are offering. Also consider the extra charges that the lenders may levy in cases like early termination of the loan or switching lenders.

These points must be kept in mind while applying for home loans. Also, before signing the documentation, you should read it carefully. It is necessary to ensure that all the terms and conditions are the same as those which you agreed upon.

Advantages Of A Credit Union

If you are looking for an affordable and convenient financing option, it would be a good idea to consider joining a credit union. As a matter of fact, most people are turning to these institutions due to the numerous benefits they offer over banks. Credit unions are becoming more and more popular for borrowing low interest home and auto loans in Texas.

Given here are some advantages of choosing a credit union for all your financial needs:

• Members Are Part Owners: Unlike banks, the members of a credit union are part owners. When a person opens an account, he actually receives a share in the credit union and a right to vote in its administrative matters. The board of directors in the credit union is also chosen unanimously by way of voting. Each member has an equal say in the operational decisions of the credit union, no matter how small or large his account size may be.
• Not For Profit Organization: Credit unions do not work with the purpose of making sales or earning profits. Their ultimate goal is to provide superior services to their members in terms of low interest loans and other financial products. When the credit union makes a profit, it is usually returned to the members in the form of dividends.
• Lower Fees And Interest Rates: As credit unions are non-profit entities, they are exempted from paying a number of taxes. Hence, they are able to offer loans at significantly low interest rates with easy repayment options.
• Better Customer Service: Credit unions are dedicated to provide excellent services to their members. They have specialized resource centers to attend to the clients’ queries and concerns regarding home loans, auto loans, repayment options or any other financial services. The members are also provided with customized loan plans and complete assistance throughout the application process.
• Less Stringent Eligibility Requirements: Banks usually have a well-defined income criterion for determining if an individual is eligible to apply for a loan or not. Credit unions, on the other hand, are quite flexible in this regard. Thus, even if you have a lower income, there are chances that you might get your loan approved from a credit union.
• ATM Facility: Some credit unions even have their own ATMs and branches. Thus, you can have an easy access to cash whenever and wherever you need.

So be a member of a credit union today and enjoy the benefits of low interest financial products and personalized services.