:: Home Buying - Important Tips (NEW)

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Summary
As mentioned earlier the "American Dream" for many is to own a home of our own. Purchasing this home is likely to be the largest financial decision we'll make, or definitely one of them! As such you should take some great care and preparation in the decision you make. Below are some industry-recommended tips in getting a home loan.

Important Tips on Getting Your Home Loan
1) Check Your Credit Report First . Before you approach lenders regarding your home purchase, it is very important to check your own credit report for mistakes. That way, if you do see there are mistakes in your credit report, you can take corrective measures before appraoching lenders. Whether you are planning to purchase a house in the distant future, or immediately, this is a good step so you can understand what your credit report shows.

2) Obtain Pre-Approval for a Home Loan. Before you go and find your dream house and achieve the American Dream, it is a good idea to do your home-loan shopping first! Getting pre-approved means a lender will check your credit history and may ask for pay stubs or other documentation on savings accounts, retirement accounts and other investments. You'll be pre-approved to borrow a specific amount of money. When you couple that amount with the down payment you plan to make and the lender's estimated closing costs, you will have a better idea of the targeted price range for your house. There are some real estate agents or sellers who even require pre-approvals.

3) What to Borrow. The pre-approval will likely give you a range or a ceiling of how much the lender(s) believe you'll be able to borrow when all is said and done. Just because a lender says you can qualify for a loan of $700,000, doesn't mean you have to take out that much on your loan. It is a maximum that you can choose to take out. The decision on what amount you'll have to take will depend on the value of the house you end up settling on, how much money you have available for a down-payment, how much you want to make in monthly payments and how much money you believe you'll have of your own throughout the life of the loan. Take a look at the Simple Loan Calculator (as well as the MS Excel file templates) that may help you decide on a loan amount).

4) Picking the Lender. Again, purchasing a house is very likely going to be your single, largest financial decision. So take your time in deciding who should be your home loan lender. Ask your friends, family, coworkers and read up on the lenders your considering. You can also approach multiple lenders when you are obtaining your pre-approval or actual loan quote.

Additionally it is suggested to approach a mortgage broker or two, in addition to the lenders you are contacting. Mortgage brokers act in the same manner as insurance brokers, in that they deal straight with the lenders and can often find good deals. Mortgage brokers are often very familar with real estate and moretgage terminology and can help be your advocate with the lending companies.

As you gain experience on home loan lenders and mortgage brokers the Credit Help Guide US wants to hear about it! Share your feedback with us so other consumers may benefit. As reviews are received they are placed in the Review section for all to benefit.

5) Save Up. As you make a strategic decision to own property it is a good idea to begin saving up your money. The money you save will help you with your downpayment and your closing costs. The more you can place towards a downpayment, the less you'll need to borrow from a lender and you can also bring your interest rate down.

The money you save also should go for a mortage reserve. That is, if the worse should happen and you lose your job, have unforeseen medical expenses or anything along those lines, you want to try and keep your home. Industry experts suggest trying to save at least enough money where you could survive for three full months without a paycheck or extraneous loans.

6) Ask Questions. This is a good strategy for any loan you're thinking of making. The lender and/or the mortgage broker is going to make money from your loan, so you shouldn't feel inhibited to ask whatever you like.

A large subject to ask questions around includes the type of loan(s) you and your lender are looking into. There are different types of loans that have different structures and behaviors. For instance, with a conventional loan the payment will remain the same for as long as you keep the loan. However, an Adjustable Rate Mortgage (or an "ARM") will have payments that can fluctuate or change. If you're planning on living in the proposed property indefinitely, then perhaps a fixed loan may better. In addition the duration of your loan can impact your total cost. Will you take a 15, 20, 30, 40 or 50 year loan?

See the new Questions to Ask when Getting a Home Loan article to read more about questions you may want to consider.

7) Understand the Costs of Owning. If you've always been a renter, you might be in for a few surprises. As a renter, the landlord is responsible for maintenance, upkeep and repairs. The landlord also pays the property taxes and special assessments. Once you sign the final papers, those responsibilities are all yours, and they can be expensive. So you should make a list and estimate these costs when you are figuring how much you can pay toward your home each month (and how much to place aside for your reserves - point #5 above).