Before you start house hunting, the best thing you can do is to get pre-approved for your loan amount. Once you and your lender have determined the loan amount you're approved for, you can start house hunting with confidence. In a tight housing market it will also give you an advantage, as other potential buyers may not have taken this important step.
Security comes from knowing what you can afford while you're shopping for a home. This kind of security will go a long way as you search for the best value for your money. Being pre-approved means you won't be wasting time looking at homes out of your price range or "comfort zone".
Hint: Check Your Credit
Over 70 percent of all credit reports in the United States contain errors? Your lender will be looking at your credit report and making important decisions based on the information that is contained within -- decisions that could make a big difference in the bottom-line. Your interest rate is partially determined by your credit score.
Lenders use complicated scoring formulas to determine how much you can borrow and the interest rate. I suggest that you check your credit report for any inaccuracies. Make sure you obtain a credit report that gives you information from all three major credit bureaus. Contact the credit bureaus immediately to correct any mistakes. This could result in substantial savings on the cost of your loan.
Tip: Fixed or Adjustable Rate Loan?
It always pays to shop around with different lenders. You can choose to get a fixed rate loan, which you'll negotiate with the lender. The interest on an ARM may be adjusted one percent annually, and up to five percent over the duration of the loan period. So should you go with a Fixed rate or adjustable? It really depends on your situation -- in a rising rate environment a fixed rate loan can offer some piece of mind but for those who might not be planning in staying in their home more than a few years, an ARM can offer significant savings. The best advice is to do your homework, find the most competitive rate and don't take the first offer you get.