By Carol Cass
Most of us wouldn't dare pick up the phone and invest our life savings in the stock market without the assistance of a broker who knows how the stock market works or at least learning a little about the stock market, ourselves. Buying a home is usually the biggest investment a person will ever make. That's why you should do the research that's necessary to make a proper decision about the home you purchase and the home loan you'll get, or you should at least ask the advice of a few friends and family who have been through the experience, themselves. A house usually costs anywhere from 20% to 40% of a person's gross income, so, isn't it worth a little of your time to educate yourself before investing that much in a home?
When looking for a home to purchase, the first thing you want to do, especially when looking at several different homes, is to get pre-approved for your home loan. Now, pre-approval is not the same as being pre-qualified. Getting pre-qualified tells you how much you are qualified to borrow, but pre-approval can make the difference between buying a house and not buying a house, because something can happen in the process of being approved to keep you from getting the loan you want. A loan officer will pre-qualify your income and credit, and they'll give you a pre-qualification letter. However, when you're pre-approved, you are actually approved for a loan up to a certain amount. This allows you to negotiate with the seller just like you had cash money. Consequently, you can often negotiate your way into a much better price and often save thousands of dollars.
You might even find that some realtors won't even show you homes without a pre-approval, because they don't want to waste their time and yours in case you can't get approved for a home loan. Being pre-approved says, "I'm ready to buy!" I think you'll find that a realtor will work much harder for you if they know you're ready, willing, and able to purchase a home.
Another area in which it's very important to do your homework is in choosing a lender. Having the lowest rate doesn't necessarily mean that a lender has the lowest total cost for a mortgage loan or the right program for you. You should look at the overall cost of your loan, including loan fees, and discount and origination points in addition to the Annual Percentage Rate. These all add to the overall costs of your loan. And It's always best to shop for the right loan just like you'd shop for the right house to buy. Interview at least 3 to 4 lenders. This will give you enough experience to know what you're looking for by the time you've talked to 4 lending institutions, and then you can choose the best loan program for you. And, when a mortgage company tells you that they've locked your rate, ask them for a written statement detailing the interest rate, length of the rate lock, and details about their program.
Ask your family and friends for pointers from their experience, and ask if they would refer their mortgage company. Don't just be shuffled to the mortgage company that services your realtor, because your realtor is anxious for the sale and will give you to the company that meets his needs, not necessarily yours. And remember, when you've done your homework, you'll find that you'll have fewer problems after you move into your new dream home.
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Carol Cass has written several articles on various subjects. This article compliments her website on
mortgage calculators which helps people educate themselves on mortgages.
12-18-2005, 11:30 PM
Educate Yourself Before Buying Your Home
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