1. Understand your finances – Before going into any lending situation, it’s extremely important to know how much you can pay for a home. Purchasing a house you cannot afford runs the risk of foreclosure so choose the house you can afford now rather than the one you think you can afford later and borrow accordingly.
Know your credit score, reduce your debt – Knowing your credit score is crucial to this process because the score indicates how much you’ll be lent and the interest rate. There are plenty of free credit report offers and it’s in your best interest to take advantage of them. Similarly, the way to increase your credit score is to reduce your debt. You want to go into this process as close to debt-free as you can to receive the lowest interest rate possible.
3. Research different types of loans – Go in confident by understanding the different types of loans that a particular lender offers. Similarly, be aware of the different fees and penalties that different lenders charge, such as late fees and closing costs.
4. Be wary of the cheapest option – This concerns fixed versus adjustable rate mortgages. A fixed rate may not the be cheapest option at the time, but it’s fixed meaning that it won’t change. An adjustable rate mortgage is only fixed for a certain period of time and then is ‘adjusted’ sometimes as often as monthly.
5. Utilize online comparison websites –There are several mortgage lending sites online that ask basic questions about your yearly income, the size of the home you want, and so forth. These sites will provide a realistic idea of the type of home you can afford and what your payments will be like if you decide on this home or that. Choose a rate and payment schedule you’re comfortable with.