Congratulations! You’re thinking about buying a home, and while it’s one of the biggest financial decisions you’ll make in your life, it’s also a great way to invest in your future. However, this is a marathon and not a sprint, so let’s take a moment to go over what you need to know before you start the application process.
Go shopping for a lender.
To start shopping for a home loan, you’ll need to know who the lenders are in your area. Lenders will be listed by name and address on Google or in the phone book.
Ask friends and family where they bank or if they’re willing to refer one of their friends/family members who have worked with a particular lender before. Remember: You don’t have to settle on an option that’s convenient now—you can always switch banks later if you find something better suited for your needs down the line!
Once you’ve chosen which lender(s) seem like good fits based on their location, hours of operation and customer service reviews (on Yelp), it’s time to learn what each company offers consumers looking for a mortgage loan so that they can make an informed decision about where they want their money going over the next thirty years!
Consider the interest rate.
When you apply for a home loan, you’ll have to decide what kind of interest rate you want. The interest rate is the cost of borrowing money, and it’s determined by the market—which means it can go up or down. Interest rates are usually based on the economy, inflation and federal reserve policy. Typically, fixed-rate loans are cheaper than adjustable-rate loans—but they also come with more restrictive terms.
Fixed-Rate Home Loans
The advantage of a fixed-rate home loan is that your monthly payment remains consistent throughout the life of your mortgage agreement; however, if interest rates decrease during this time period, then your mortgage payment will remain higher than if you had opted for an adjustable-rate mortgage at that time.
Pre-approval is always better.
Pre-approval is always better. It’s a smart idea to get preapproved before you start looking for your dream home. Pre-approval is a process that takes less time and effort than applying for a full loan, but it can still give you an idea of how much you can borrow (and whether or not you qualify) without having to go through the whole process of gathering all sorts of information about yourself and your finances. This way, when you find the home of your dreams, you can use pre-approval as leverage in negotiations with sellers—they’ll know that if they don’t accept this offer from you now, there will be another one coming in soon. After!
Look for a lender with no application fee.
Many lenders offer a prequalification process, which is basically a way of determining how much you can afford. This isn’t the same as getting preapproved for a mortgage; rather, it’s just an estimate that you’ll use when shopping around for your loan.
Some lenders charge application fees. This can range anywhere from $100 to $300 or more, depending on the lender and how they do business. You should be aware of this fee if you’re considering using this lender so that there are no surprises later in your application process—and remember that any company that charges an application fee may not be reputable enough for your purposes.
If you decide not to pay an application fee (or don’t have access to one), make sure that you have funds available for closing costs before submitting any paperwork with your lender.
Read the fine print
You can’t do anything without reading the fine print first, and this is no exception. Here are some things to consider before you take out a loan:
- Read the terms and conditions of your loan carefully to see if there are any unexpected expenses or fees associated with it. If you fail to do this, then you could end up paying more than expected!
- Make sure your credit score is good enough for approval. There’s no point in applying for a loan that won’t be approved because of bad credit history!
- Make sure you understand all of the terms in an agreement before signing on the dotted line; otherwise, you could end up facing financial ruin down the line due to something as simple as forgetting about an additional fee charged by a lender during closing costs (or even worse!).
We know that it can be difficult to buy a home without much preparation and planning. That’s why we want to provide some tips on how you can make the process more manageable. We hope this article helped you understand what kinds of things need to be considering when deciding whether or not to apply for a home loan, so use these as guidance when going forward with your decision-making process.