Understanding the home loan application process can help you get the best mortgage rate and lowest fees at closing.
Follow this checklist as you shop for a home loan.
- Check your credit reports from all three of the major credit-reporting bureaus and fix any errors or outdated information. Borrowers with good credit scores qualify for more home loans and better mortgage rates.
- Get pre-approved for a mortgage by disclosing your income, savings and outstanding debt and having a lender check your credit report and credit score. It’s typically free, and if you qualify, a lender will supply a letter that states how much can be loaned.
- Apply for an FHA loan if you don’t meet the qualifying standards for a conventional home loan.
- Hunt down the lowest mortgage rate. Use a database that aggregates the best mortgage rates, and get an understanding of the cost of home loans.
- Factor in all of the costs of homeownership when you budget for your monthly mortgage payment. As a homeowner, you will owe property taxes, homeowners insurance premiums, utility bills, maintenance costs and perhaps HOA fees. A mortgage calculator can be of help in determining a monthly payment you can afford based on your income and other expenses.
- Ask the seller to pay some of the closing fees for you, or negotiate with the lender to reduce the expenses such as origination fees, settlement charges and administrative fees.
- Use a mortgage calculator to determine if you should pay off points to lower your rate or use that money to make a larger down payment.
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