Home equity loans and home interest rates have been going down steadily for the last two years. The federal stimulus package and lower interest rates are making owning a home a more affordable venture. However, despite all the talk of these positive trends, there are always people who will choose to foreclose on their home rather than accept the offers of lower payments and no interest. While this does happen, it is not quite as common as you might think.
Home interest rates on investment property can be lower if you are willing to do the research and know what you are looking for. First time home buyers, especially, need to understand that first time home buyers often get into bad habits that make them borrow more than they can afford in the process. Second home (vacation home) mortgages can have much higher rates than primary residence mortgages. And if your application is not as solid (i.e. you have a low credit score or small cash reserves) you may well need to put as much as 20% down.
Buying a vacation home used to mean low interest rates on primary residence mortgages. However, with the recent recession many lenders are requiring much higher qualifications and/or fees for these loans. Most of these lenders now favor using a guaranteed minimum income and credit score requirement for obtaining a residential financing loan for a vacation home or second home. If your credit score is less than sufficient, even a second home loan can have higher than market rates. Even those who have excellent credit can have higher than market rates because of certain fees that are associated with these types of loans.
There are some great deals on investment properties for the first time buyer. You should take advantage of the “stacked” secondary residences available. Your next step should be to look for “secondary” type properties. The main benefit of this approach is that you will have several different options to choose from. The main drawback is that it can make the search for interest rates on investment properties a little more difficult.
Don’t let low credit scores keep you from buying an investment property. Many people think that it’s a big no-no to apply for a mortgage while they’re in the process of repairing their credit scores. However, if you are serious about purchasing vacation homes or investment properties, you should at least consider looking at properties that are for sale by owners. This means that you will have some control over the interest rates.
If you take the opposite approach, you should consider primary residence and vacation home refinance options. Primary residence mortgage rates have been on the rise recently. Even though the mortgage rates are high, there are many ways for you to obtain competitive interest rates. For example, refinance your primary residence with a fixed rate mortgage and/or a low rate loan. It is important to remember that you can pay off high interest rate debt with primary residence interest rates.
For vacation home and second homes, it’s important to get prequalified. If you know the specific details of the home purchase, you can ask for prequalification letters from at least three lending institutions. In fact, some mortgage brokers and lenders actually encourage their customers to ask for prequalification letters. Once you obtain these letters, you can negotiate the best interest rate with the lenders.
Once you’ve obtained prequalification letters, you should compare the interest rates from at least three different mortgage brokers or lenders. If you want to reduce your potential mortgage payment, you should take the time to do your own research before you apply for a second home mortgage. It is also advisable to ask for referrals from family and friends who have recently applied for a mortgage. By getting quotes and information from at least three lending institutions, you can reduce the risk of being assigned the same or similar interest rate. With a little effort and research, it is possible to find great interest rates on your first mortgage. Remember to shop around to save money.