What you should know before applying for a home loan.

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If you are like my wife and me you have probably wanted to purchase your own home for a long time. You have shopped for homes and dreamed about what you life would be like in some of the homes you looked at. You probably have some money saved up for a down payment and closing cost.

This article is intended for the person new home buying and working with banks and should give you some of the information you will need to make the best deal possible. Having some knowledge before you start can help you save money, time and will help to keep you from making a bad deal.

One of the first things to think about is the loan type. Consider the various options such as fixed rate compared to a variable rate loan, prepayment penalties, balloon payments and so many other options. Be sure to consider each choice carefully and read as much as you can till you fully understand the options.

Think about purchasing points. Points will lower your overall interest on a loan and help to keep you cost down (less interest over the term of the loan can add up to a lot in savings), and make for lower monthly payments.

Getting pre-approved for you loan is a time saver. Not only will it save you time but also a lot of the frustration you might experience if you shop for your house before shopping for the loan. In fact getting pre-approved for you loan and the maximum amount you can or are willing to be in debt for can save you money too.

A major reason to get the loan approved before even shopping for the home is that most sellers are more likely to bargain with you than others who don't have this pre-qualification in place. The buyer already knows you can pay the price you are offering while other bidders will still have to get a loan to cover the price they bid.

Making a larger down payment is an option to consider also. A larger down payment makes for a smaller to loan-to-value ratio and lenders will often give you more favorable interest rates as you are less of a risk with a smaller loan. You may also be able to avoid the need for a mortgage loan insurance.

On the other hand a higher down payment can be difficult to come up with that amount of cash. You may not have enough to make a larger down payment and need to put off your home purchase till you do. Keep in mind that buying points can save you money much the same as a larger down payment and that might be a better option.

Shop around for the best lender you can find. Not all lenders offer the same services and some are just plain bad to work with. Ask around of people you know who have recently gone through this sort of thing. Failing recommendations from people you know and trust you can call the Better Business Bureau and other consumer resources in your area.

There are lenders who take advantage of people who are elderly, low income, un-informed, poor credit history or who are otherwise more needy than others. These are called "predatory lenders" and should be avoided at all cost. To do business with them hurts your bottom line and only serves to encourage them to take advantage of others.

Beware of companies that call you, mail you or email you. It may be enticing to follow that lead in some official looking mail "you have been pre-approved". We get these all the time and most come from spammers that don't even know the companies they are dealing with.

If you get stuck looking for the right lenders there are a few people that you can ask. Start with people you know and trust as mentioned above but you also you can ask your banker, credit union or real estate agent. There are others you can also ask and that will vary from person to person.

The bottom line is you don't want to be taken advantage of. You don't want to pay more for you home than you really should. Making sure you come out on top is your responsibility and reading as much as you can find to help you understand what your are about to do is a wise choice. If reading is not giving you all the info you need then ask people for help.