The Home Loan Guide

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We Help You Learn How to Get a Home Loan

The Home Loan Guide aims to teach you everything you need to know in order to get any type of home loan, including a first mortgage, a second mortgage, a refinance loan, a home equity loan, a home equity line of credit, a debt consolidation loan and even a bad credit loan. Use this home loan guide to determine what kind of loan works best for you and what you need to do to get the best deal for YOU. The most important thing is that you find a home loan that suits your needs. To help you with that goal, The Home Loan Guide aims to educate you enough that you will be armed with the most powerful tool of all when you apply for your loan - the power of knowledge!

The steps to getting a home loan are quite easy if you follow these simple steps.

Figure Out Which Type of Loan You Need

There are dozens of different types of loans that may fit suit your needs. Maybe you are looking for a traditional 30 year fixed rate first mortgage? Or perhaps you want to pay your loan back quicker and would like a 20 year loan? Depending on the length of your purchase and your financial position, you can choose from first mortgages, second mortgages, home equity loans, hard money loans, loans for people with bad credit and so on. If you can't find a loan type that fits your needs then you either shouldn't be getting a loan or you haven't looked hard enough.

Look at Loans that Match Your Credit Score

It is important to start your loan search by getting a copy of your credit report and credit score. If you pull your own report and score it will not hurt your credit while you are looking for a loan. Scour your credit reports for any mistakes and start fixing them right away. It can take months before your reports are updated with accurate information. Once you have an idea of what type of credit you have, you can use that information to help you figure out which loans are right for you. People with excellent credit receive loans with the lowest interest rates and highest approval ratings. People with low credit scores can still get loans, but you may need to look at different loan types, or loans with higher interest rates if you fall into this category. Knowing what to expect based on your credit report can help you react to any negative surprises before they happen, and help you prepare for your coming loan search.

Find Out How Much You Can Borrow

It is a good thing to have an idea of how much you can borrow. It is not a good thing to borrow as much as you can. When you begin preparing for a loan, you should use debt ratios to analyze how much a bank will likely be able to lend you. Take into account your existing debt and income to help you figure this out. More importantly, look at your monthly household budget to make sure that you can actually afford the monthly payments. Take future costs into consideration. For example, if you use a loan to buy a much bigger house with bigger payments, will you have enough money each month to pay the higher utitilites, real estate taxes, and upkeep costs of a bigger house? And remember, the cost of furnishing a house is a big percentage of the value of the house. Find out how much you can borrow and then determine how much you can borrow safely. Only look for loans that are in the safe amount. And don't use adjustable rate mortgages to lower the monthly payments.

Understand the Covenants in Your Home Loan

When you start applying for loans, you'll want to make sure that you know all of the fine print from each loan. Some loans have stipulations that make them more expensive or less desireable than others. Make sure your loan has no prepayment penalties. Also, if you are looking at adjustable rate loans, make sure there is a maximum rate that is clearly defined. Also, you should know how your loan works. For example, if you are trying to minimize your monthly payment by getting an adjustable rate loan that defers its principal payments until later in the life of the loan, or by using balloon payments at the end of the loan, then you should realize how it works. Don't set yourself up for loans that you will have to refinance in the not too distant future. These are the riskiest loans of all and are the main reason for the housing crisis that happened in 2008.

Gather the Information You Need to Apply for Your Home Loan

When you are comfortable with all of the above loan steps, it's time to gather all of your information. Hopefully, you use a tax program for your taxes and online banking and credit card accounts. If you do, you can easily download a pdf or other electronic copy of all of your tax documents and bank statements. You should also pick up a scanner so that you can easily scan other documents that you may need when you apply for a loan. Doing this can save you dozens of hours and will speed up the approval of your loan because it will also save the loan provider a lot of time.

Apply and Complete the Home Loan Process

Now it's time to apply for your loan. Search many providers to make sure that you find the best loan available for you. While it is easy and often ideal to search for loans online, don't neglect your local banks and credit unions. The easiest way to check all of your available options is to find a mortgage broker that specializes in your area. They can often check the local and nationwide lenders to help you find the ideal loan. They get paid by the lender so it is usually of no cost to you.

Once you've applied, make sure you follow through and complete the loan process. Keep in touch with your lender and especially your underwriter so that you can answer their questions in a timely manner. Also, if any problems come up, make sure you take a proactive role in solving them. Don't rely on your lender or real estate agent to work on your behalf. A few weeks before closing, make sure that you've transferred any money from your savings to your checking so that you are ready to write a check at closing and complete the loan.

These were a summary of the advice provided on this site. If you prefer to follow this site from start to finish, you can easily navigate through the site using the menu at the left or by reading all of the steps in order by following the buttons at the bottom of each page that say next or previous. We hope you learn something useful by learning from our lending experiences.

The next step is to determine what type of loan you desire: