Applying for a loan to purchase a home is fraught with both triumphs and pitfalls. One of the biggest pluses is the fact that you can afford to purchase a home without the cash to buy it outright.
In addition, there are certain programs that assist people hoping to purchase their first home — even those with financial considerations.
However, there are also disadvantages to applying for a home loan. For one, not all lenders offer the same rate. If you don’t find one with a good reputation, you’ll waste valuable time.
Furthermore, if your credit is imperfect, the result may be that you will only qualify for a very high interest rate, which translates to less house and bigger payments.
The home loan application process is tedious. It requires a significant amount of paperwork and a huge expenditure of your time. You’ll be asked to submit your personal information, your financial details, and your employment history.
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Once your lender has all this information, he or she can determine how large a loan you qualify for, how much you can afford to pay, and what type of interest rate you are apt to receive.
Once you are approved for a loan, you have achieved pre-approval status. You will use this when shopping for a home because you cannot complete the purchase process and the finalization of your loan until you find a home and have it appraised.
This is yet another disadvantage of the home loan process. Unless the house you choose comes back with an adequate appraisal, you might find your lender is unwilling to grant a loan for this home. For example, if you are pre-approved for $200,000 and the home you want to purchase is for sale at $200,000 but only appraises for $120,000, chances are your lender will not approve the loan for that property.
Finding a home loan program
Finding the right program can be an advantage. There are a number of programs available for home loans, including loans for veterans as well as first-time homebuyers. Be sure to shop around for a reliable loan program prior to accepting the terms and conditions from a particular lender.
The home loan process is a bit of work, but it’s worth it if you find the home of your dreams at a price you can afford. The good thing about home loans is that you don’t need to have the cash to purchase a home if you qualify for a loan that allows you to pay the balance over a period of time.