|3. Get Loan
Steps to Home Ownership!
Few people can buy a home for cash. According to the National
Association of REALTORS® (NAR), nearly nine out of 10 buyers in
1999 financed their purchase, which means that virtually all
buyers -- especially first-time purchasers -- required a loan.
The real issue with real estate financing is not getting a
loan (virtually anyone willing to pay lofty interest rates can
find a mortgage). Instead, the idea is to get the loan that's
right for you -- the mortgage with the lowest cost and best
We recommend you start the mortgage process well before
bidding on a home. By meeting with lenders -- either online or
face to face -- and looking at loan options, you will find which
programs best meet your needs and how much you can afford.
We also recommend pre-approvals for another reason: Purchase
forms often require buyers to apply for financing within a given
time period, in many cases, seven to 10 days. By meeting with
loan officers in advance and identifying mortgage programs, it
won't be necessary to quickly find a lender, check credit, and
rush into a financing decision that may not be the best option.
What is it?
"Pre-approval" means you have met with a loan officer, your
credit files have been reviewed and the loan officer believes
you can readily qualify for a given loan amount with one or more
specific mortgage programs. Based on this information, the
lender will provide a pre-approval letter, which shows your
borrowing power. You can visit as many lenders as you like and
get several pre-approvals, but keep in mind that each one
carries with it a new credit check, which will show up on future
Although not a final loan commitment, the pre-approval letter
can be shown to listing brokers when bidding on a home. It
demonstrates your financial strength and shows that you have the
ability to go through with a purchase. This information is
important to owners since they do not want to accept an offer
that is likely to fail because financing cannot be obtained.
How do you get pre-approval?
.The loan officer will carefully review your financial
situation, including your credit report and other information.
The lender will then suggest programs which most-closely meet
your needs. For instance, a first-time buyer may qualify for
state-backed mortgage programs with little money down and low
interest rates, while a repeat purchaser (someone who has bought
a home before) with more equity (money invested in the home)
might want to get a 15-year loan and the lower overall interest
costs it represents. Typically, first-time buyers opt for the
traditional 30-year loan, with either a floating interest rate
or a fixed rate of interest over the life of the loan.
Houseaboutus recommends a fixed rate as a safer choice!