How Do You Get a Home Loan?

You've saved up a nest egg, tweaked your credit score to make sure that it's the best that it can possibly be, and secured gainful, steady employment. Now you're ready to get a home loan and purchase your dream house. How does the process work?

One of the first things you'll need to do is to locate a lender. You can use the Internet to compare lender offers, find loan officer references through friends, or triangulate to find a lending institution conducive to your financial goals by getting references from disinterested real estate agents.

The next step is to fill out your mortgage application (called a 1003). Make sure you understand the closing costs, prepayment penalties (if any apply), and terms of the agreement. Your lender must provide an estimate to you within three business days of getting your application.

Work with several lenders to compare fees, and don't hesitate to negotiate. If you can pay more points on your loan, you'll be able to reduce your interest rate. However, you don't want to necessarily drain your nest egg to qualify for a better rate. Your mortgage should be couched as a major part of your long-term financial plan.

Some lenders will require you to pay fees upfront. This money goes to assessing your credit report, processing paperwork, and potentially doing an appraisal of your dream property. Next, hand over paperwork and documentation to your mortgage processor. Examine your papers under the microscope before you close your loan.

Sometimes lenders will try to change conditions and terms at the last minute and pressure you into signing a less-than-stellar agreement. Don't allow your lender to push you around.

Once you've finished your agreement, you'll have to deposit your down payment into an account and then move that money into your escrow company or title entity. Be aware that you generally don't want to work too many lenders, since every lender inquiry can lower your credit incrementally.

Lower your so-called debt-to-income ratio, and you'll be in a much better position to get the rates you want. Finally, peruse the national housing rate regularly, and research how much properties cost in your target area, so you can intelligently negotiate a good mortgage rate.