All debt is risk some way or the other and no one is immune to this risk of debt. Even if you have a blemish less credit history and want to avail the safest loan option, home mortgage loan the amount of risk you are having is quite high. The essential key to attain a home equity loan for a dream home is to minimize the debt risk as much as possible. If you like to know more in this regard, read on the following points.
1. Pay cash instead of credit
Paying cash instead of credit seems almost an outrageous idea but this is the best and least risky way to buy a home. If you purchase a home by paying 100% in cash and carry no mortgage at all, it can keep you away from the risk of losing the home in future. If you think you are losing the tax benefit by paying off your home early then you should pay a closer attention to the tax benefit calculations. Tax benefit allows you to waive approximately 25% of the interest payments but to shirk paying 25% to the IRS you have to pay 75% more to the mortgage lender. This can not be considered a smart financial trade in any way.
2. Save for down payment.
Most of us are unable to pay 100% cash for our homes. Therefore, the next most convenient plan to minimize the risk while buying a home is to save at lo least 20 or 25 percent of the total cost of the home for a down payment. A sound amount of down payment will enable you to qualify for good mortgage loans at greater interest rates. Moreover, it helps you to have a buying experience and saves you from being charged PMI (Private Mortgage Insurance) on your home mortgage loan. This can definitely leave with more disposable income to pay of you debts at a faster rate.
3. Diminish the risk involved
If you purchase a house and borrow a mortgage loan at a high percentage of your income, you run the risk of losing home in case you default on your payment or you suddenly lose your source of income. With the current economic downturn, any time you can experience financial catastrophes like layoffs, company downsizing, or physical disability and change of career field. To evade such disasters you better choose a house well below what you could qualify for. The monthly payment on home mortgage incorporating the taxes and homeowner's insurance should not involve more than 25 to 30 percent of your take-home income. To minimize the risk involved and to smoothen, the home buying process, this plan is truly effective.
4. The 15 year mortgage plan
Fifteen year mortgage is certainly a viable option than the more common thirty year mortgage. If you are ready to pay a little more each month, you can own the home a whole lot faster and at the same time you will be able to save in interest payments as well.
Follow the above mentioned points and attain a home mortgage loan in the best possible way.
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