Getting a Loan and Choosing a Lender: What You Need to Know

Wednesday, July 06 at 09:30 AM
Category: Personal Finance

Preparation is key to navigating today’s housing market. The American Bankers Association offers the following tips to help prepare potential homebuyers.

Know your own financial situation
Before you begin the home loan application process, determine what you can realistically afford. Take into consideration your credit score, how much debt you currently carry and what type of down payment you are prepared to make. While it’s not required, getting pre-qualified before any home purchase is a good idea since many sellers are requesting some kind of pre-qualification documentation prior to negotiating the home sale.  

Have your documents ready 
While each bank may require different documentation, you may be required to furnish the following information depending on your employment and financial situation:
  • Pay stubs
  • Tax returns
  • Financial statements (one that is less than 60 days old)
  • Copies of additional monthly payments such as car loans, credit cards, and student loans
  • Any other information (such as proof of additional income) you think will help your banker to positively evaluate your credit request positively.
Review the basics
Knowing the fundamentals of the home loan process is an excellent way to prepare to choose the right mortgage. Make sure you are familiar with interest rates, loan terms and additional fees associated with buying a home. 
 
Compare quotes
Beyond the interest rates, there are closing fees and points and commissions. You will want to compare these for all the lenders on your list. There are several calculators available online that will help you determine which loan provides the best value.
 
Choose a trusted lender
Get references from family and friends and do your research. Call your local Better Business Bureau and ask if it has had complaints about any of the lenders you are considering. Keep in mind, federally insured banks are required to operate under a high level of regulatory supervision. A fully regulated bank may be your best choice. 

Read between the lines
Slick TV ads, telemarketers or door-to-door salespeople will often offer fast, easy loans for houses, cars and home repair but not disclose all of the details. In some cases the interest rate quotes may include an origination charge so at first it may look attractive, but keep in mind it will cost an origination fee. Read the fine print. If it sounds too good to be true, it probably is.
 
Ask questions
When in doubt, ask for clarification from your lender. Discuss how long the loan process will take, how you will communicate – by phone or email, and who will service your loan. 

Information courtesy of American Bankers Association.

Tags: Financial Education, Home Loans, Lending and Financing, Mortgage
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