Know the Difference

The term of the loan that you take out will be the number of years over which you will repay this loan. The most common terms are 15 years and 30 years. If this loan has a "balloon" payment, the loan term will be shorter than the number of years to amortize the loan. For example, a loan with a 5-year term amortized over 30 years will have the same monthly payment as a 30-year loan with the same interest rate. The difference is the 30-year loan will have equal payments for 30 years. The 5-year loan will have equal payments for 5 years and then a very large, or balloon, payment for the remaining balance.

Compare Loans Among Lenders

First, devise a checklist for the information from each lending institution. You should include the company`s name and basic information, the type of mortgage, minimum down payment required, interest rate and points, closing costs, loan processing time, and whether prepayment is allowed.

Speak with companies by phone or in person. Be sure to call every lender on the list the same day, as interest rates can fluctuate daily. In addition to doing your own research, seek a lender with access to a database of lender and mortgage options. Though your lender may primarily be affiliated with a particular lending institution, he or she may also be able to suggest a variety of different lender options to you.

Estimate Quotes

If you`re shopping around for a loan quote, you`ll be attempting to get an estimate that lists all fees paid before closing, all closing costs, and any escrow costs you will encounter when purchasing a home. The lender must supply it within three days of your application so that you can make accurate judgments when shopping for a loan.

Know your Responsibility as a buyer

To ensure you won`t fall victim to loan fraud, be sure to follow all of these steps as you apply for a loan:

Be sure to read and understand everything before you sign.

Refuse to sign any blank documents.

Do not buy property for someone else.

Do not overstate your income.

Do not overstate how long you have been employed.

Do not overstate your assets.

Accurately report your debts.

Do not change your income tax returns for any reason.

Do not list fake co-borrowers on your loan application.

Be truthful about your credit problems, past and present.

Be honest about your intention to occupy the house

Do not provide false supporting documents.

Be sure to consider your financial situation as thoroughly as possible before applying for a loan. If you`re worried you won`t be able to afford to pay off the loan in the future, take the time to make sure that you can make arrangements for the payments before you apply.

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