Loan Basics

 

Loan and financing issues are inseparably linked with other aspects of the home buying process. In Getting Started, we’ve discussed the reasons you should begin your home search by sitting down with a good loan officer and talking through the options that are available to you. In Mortgage Lender Staff, we’ve described the roles of the various people who are involved in providing you with a loan and outlined a game plan for helping you choose a mortgage lender to work with.

A Summary

  • The loan officer you meet with to begin the process of obtaining a loan is not the lender’s gatekeeper but your “loan coach.” Their job is to identify the loan that best meets your needs and to find a way to help you get it.
  • If you’re going to buy a home in the next year, don’t pay off credit cards, sell or buy a car, or do anything else to get your financial house in order before you meet with a loan officer.  Outline your financial situation and your home purchase plans with the loan officer and let them help you put together a game plan.
  • It is generally best to work through a local bank or mortgage broker, not through the internet or with a lender in a different state. You will generally get the same money at the same rates, but with the local lender you’ll also get the benefit of their knowledge of local financing and home purchase practices.

Less is More

The web provides an ocean of good mortgage loan information. Links to some of the best sites are provided below. But a word of advice: Don’t go overboard in exploring this ocean of information. You will flounder and you might drown. More specifically, don’t try to replicate the loan officer’s knowledge and experience by reading books or surfing the web. You don’t need to do that and you won’t succeed. Moreover, much of what you’ll read about mortgage loans on the web — or in print — is wrong. And all of it is incomplete. It is wrong or incomplete because:

  • Change is the only constant in the mortgage loan market.
  • Local real estate practices influence loan practices.
  • The specifics of your situation may not translate simply into the general rules that govern the mortgage loan industry.

Useful Links

Still, as long as you don’t let it overwhelm you, or discourage you from talking with a loan expert in your area, the information on the web can be well worth a few hours of your time.

  • “Freddie Mac” has a great tutorial on the home buying process with sections on credit and loans. The site provides a number of useful calculators to help you compare renting to buying, estimate how much money you may be able to borrow, and so on.
  • HSH Associates‘ site will take you beyond the basics. It’s one of the richest sites on the web for general information on loans, for housing and mortgage statistics, and for its variety of loan calculators

Most mortgage loans in the U.S. are ultimately funded by either FHAFannie Mae,Freddie Mac, or the VA. Their sites provide rich sources of reliable and relatively unbiased mortgage loan information.