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Introduction
Most first-time home buyers are unaware of how to approach getting a loan for a house, townhome or condominium. It helps to plan ahead -- the better prepared you are going in, the better your chances of getting approved at a low interest rate. Keep in mind that it can take months to finally be approved for a home loan. -
Step 1: Save Up and Pay Off
It is a good idea to have a substantial amount of money saved up to use as a down payment. at least 10-20 percent of the price you are expecting to pay is a good ballpark. More, of course, is better. The larger your down payment, the less you will pay in interest. Also, you will have equity before you even move in to your new home.In addition, you should get as much of your other debts, such as credit cards, paid down in order to up your FICO score and free up credit for your home. The less money you owe, the more money you will be able to borrow, and the better your interest rate will be.
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Step 2: Get Approval
You should get a credit approval letter from a lender before you begin looking for a new home. Go to your bank, credit union, or other financial institution and fill out an application. They will look at your credit, finances and banking history to determine how much money they are willing to lend.While you will probably not find out any details, such as interest rate, until final negotiations, your credit must be approved before you can seriously begin your housing search.
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Step 3: Find a House
Once you have your approval letter, it's time to go house hunting! Look at homes that fit within the limits provided by your lender. Once you find a house you like, negotiate the price with the owner or real estate agent. Once you settle on a price, go back to your financial institution. They will request an appraisal, and start working on getting your loan processed. Eventually, your loan will close and you can start packing. -
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