Basics Explained: Home Loan 101

Home loans are a long-term financial commitment for most people, so it’s important to do your research and select the right type of loan. So, we’ve put together a quick guide explaining how you should shop for a mortgage, what you need to do to qualify for the loan, and how to finally choose the right loan offer.

Shopping For A Mortgage

Before you begin shopping for a mortgage, it’s a good idea to check your credit score since it has an impact on the interest rate that you will be quoted. Next, you should compare loans from different lenders, either online or in person. When you compare loans, you’ll want to check the interest rate, charges associated with the loan, and the loan terms. Customer service is important too. The lender you pick should be easy to contact and responsive to your concerns and questions.

Qualifying For A Mortgage

Qualifying for a mortgage can seem intimidating, however, it’s not as difficult as most people expect it to be. The process begins with the lender doing your credit check. You’ll then have to submit certain basic information or documents to the lender. Prepare to submit your W-2s, tax returns, pay stubs, and bank account statements. You may also have to submit an application form to the lender. While certain lenders will allow you to do this online, some will require you to either visit them in person and submit the documents or mail it to them. Once your paperwork is in, the lender will approve your loan and issue a pre-approval letter.

Choose A Mortgage

The mortgage you choose should be based on your resources and goals. For instance, you can choose a private or government loan, adjustable-rate or fixed-rate mortgage, and a 15-year or 30-year term, based on what your goals are and what you can afford. Once you decide which loan you want to proceed with, you can finalize the loan by paying the closing costs.

The Bottom Line

In the future, if your credit score improves significantly, you may want to consider refinancing your loan to one that has a lower rate and term. This will help you save even more money in the long-run.

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