How to Get a Home Loan

Securing a home loan is the most important step in the home-buying process. Here are the basics for getting your financing.

Find a lender. Ask friends, family or co-workers for referrals; speak with local real estate agents; search the Internet.

Fill out a loan application.

Get an estimate of closing costs from the lender you choose. By law, the lender is required to provide this statement to you within three days of receiving the loan application. Make sure to ask what type of loan program your lender has selected for you, including the rates, terms and any special information, such as prepayment penalties.

Compare costs, fees and terms of loans if you are working with more than one lender.

Negotiate fees. Sometimes you can negotiate the amount of fees or loan points (a point is 1 percent of the loan amount) the lender charges you.

Consider lowering your interest rate by paying more points. The relationship of interest rate to points paid is an inverse one; the more points you pay, the lower the interest rate.

Provide required documentation.

Pay any up-front fees. Sometimes the lender requires that the appraisal, credit report or processing fee be paid at the beginning.

Review loan papers. Approximately one week prior to closing, loan papers will be ready for your review. Make sure the loan matches the original quote you were given.

Sign your loan papers and deposit your down payment funds into your account four to six days prior to closing.

Bring a cashier's check for the down payment to the title company, escrow company or attorney handling the closing. The lender will send the title company a check for the loan amount.

Get ready to congratulate yourself. Once the transaction closes and you have signed off on all contingencies, and received a copy of the deed and a set of keys, you own the home.

If you are a first-time home buyer, you may qualify for a lower down payment or interest rate. Check with mortgage brokers, online mortgage companies, your county housing department or your employer to see what programs are available.

Too many inquiries can make it look as if the applicant is shopping for credit - which is a red flag for some lenders. When you do select a lender, you may have to explain in writing why there are other inquiries on your credit report.

Lenders may impose limits on how much of your down payment can come from borrowing.

Remember that money received from a lender will show up on your credit report, and your payments will factor into your debt-to-income ratio.

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