Buying a home is a life-changing financial decision, as homeownership can allow your money to grow over time without you having to work at it. The process of buying a home is neither quick nor easy, but with the right help, it can be made simpler. The first thing that you need to do before you even start looking at houses is get preapproved for a home loan. This will allow you to understand what type of a house you can afford, and it will allow you to make a legitimate offer when you find the right house for you.
Step 1
Ask your Realtor for his recommendation for a good lender. Your Realtor should have built relationships with many different lenders and should be able to give you the contact information for a trustworthy lender. The Department of Housing and Urban Development states that Realtors may not accept referral fees or anything of value from lenders. You can also find a lender by asking friends and family members for referrals or looking in your local newspaper.
Step 2
Fill out the application given to you by your lender so that he may evaluate your financial worthiness to get a mortgage. The National Association of Realtors states that the lender will do a credit check on you. Get a preapproval letter, prequalification paperwork and copy of your credit report from the lender once he has reviewed your financial history. The preapproval letter will allow you to submit offers on properties that you like.
Step 3
Shop around for better terms before accepting a specific loan. Take the copy of your credit report to any additional lenders. The more often your credit history is checked by lenders, the more likely it is that your credit score will get docked. According to BankRate.com, you can also negotiate with lenders in order to get them to lower the closing costs or even the interest rate.
Step 4
Look at the preapproval letters and prequalification paperwork to make sure you know how long they last. Lending Tree states that preapproval letters expire after a specific period of time, so if you take too long, you will need to get a new preapproval letter. Let your Realtor know what amount you qualified for so that you can begin seeing homes in your price range.
Step 5
Decide what the best type of loan is for you. Conventional loans require large down payments, according to BankRate.com, while FHA loans, which are backed by the Federal Housing Administration, require as little as 3.5 percent down payment. BankRate.com also states that VA loans, which only qualified veterans can obtain, do not require any down payment. One benefit that conventional loans have over FHA and VA mortgages is that conventional loans typically do not involve monthly impound payments, which FHA and VA loans do.
Tips and Warnings
- According to the National Association of Realtors, meeting with a good lender is essential so that you can learn about the different types of loans that are available to you and what you qualify for.
Things You'll Need
- Proof of income
- Information on debts and assets
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