The Home Loan Guide

Determine How Much to Borrow.

Depending on your credit, your income, your current debt load, and other factors, you will be able to borrow different amounts of money than others applying for the same loan. Before you apply for a loan, you should have some idea of how much you realistically can borrow, and of how much you want to borrow. Here are some guidelines:

How much can you borrow? - Try to be realistic on this. If you have good credit and you feel that the loan payments would be well within your means, you should probably be able to borrow that much money. However, if you have bad credit, don't expect to be able to borrow as much money as you need. The amount of money that you can borrow will vary dramatically between lenders. If you are seriously considering applying for a loan, your best bet is to apply to a company that has lenders compete for your business. That way, you can get several assessments of your creditworthiness in one easy step. Also, because different lenders are looking for different types of investments, your loan could be worth twice as much to one lender versus another. It is really hard to determine how much you can actually borrow until you apply for a loan. However, don't get discouraged until you've thoroughly explored your options. A good example of this is the following: A friend of mine wanted to get a first-time home loan. He applied at his local bank and was told that they would lend him $70,000. Discouraged, my friend almost gave up on buying a home until he used an online service that included various lenders competing for his business. When he did so, he realized that he was able to borrow over $100,000. Why, because often times, mortgage companies are more lenient than banks, and even more so, certain mortgage companies really need a specific loan type (for example, a single family loan in a certain geographic location) to balance out their portfolio.

How much do you want to borrow? - You should know how much you want to borrow before you apply for a loan, especially if it is a home equity loan, a home equity line of credit, or a second mortgage. This is an important topic because often, if you have excellent credit, the lender will often offer you much more money than you were planning on. Don't let this catch you off guard. If this happens, only accept a loan for the amount of money you really need. By accepting higher loans, you are much more likely to spend the additional money on frivolous items and you could also have to pay interest on unused lines of credit or on money you would not have otherwise borrowed.

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