Basic Guide to Home Loans

If you’re looking to buy your first home or this is the first time you’ll…

If you’re looking to buy your first home or this is the first time you’ll be using a mortgage, the process might seem a little confusing. To help, here is a quick guide breaking down home loans Arizona-based.

What Is a Home Loan and How Does It Work?

If you’ve ever borrowed money from a financial institution, you have a basic idea of how a home loan works. You borrow money to purchase the home from the buyer. You then repay the loan with interest over time.

It’s important to understand that if you do not repay your home loan, the lender can take your home and sell it to someone else to get their money back. Therefore, it’s important that you find a loan with terms you can handle.

Steps of a Home Loan

There are several steps to getting a home loan. The first is getting preapproved. This is when the lender determines if you meet the income and credit requirements to borrow the money. It also tells you how much they’re willing to loan you.

It’s important that you don’t rely solely on this number. When lenders crunch the numbers, they do not take into account things like your kids’ field trip money, vacations you want to take, holiday spending, or other financial goals. They determine how much you can afford based on your income and your debt. You need to calculate how much you can afford each month yourself.

After preapproval, you start house hunting. This can take some time, depending on what you’re looking for. When you find your home, make an offer.

If the buyer accepts, you move on to the next step – final approval. This involves another credit and income check, a lot of paperwork, appraisals, and inspections. If everything is approved, you move on to closing on your home and moving in.

This is a very condensed explanation of home loans, but it can give you a decent idea of the process. For a more in-depth understanding, you can talk to a real estate agent or mortgage lender.