Home Loan Tips Anyone Can Use

1. Check your wallet.

First thing's first. When it comes to shopping for a home loan, you need to determine how much house you can actually afford. Be sure to consider the equity in your current home (if you own), the amount of money you have for a down payment, what you can afford in monthly payments, as well as real estate taxes, closing costs and insurance (home owners insurance and possibly Private Mortgage Insurance -- PMI -- if you put less than 20% down). Remember that debt obligations, such as credit card bills, alimony, child support and student loans should be no more than 36% of your pretax income. Be sure to do the math ahead of time so you don't break your bank in the long run.

2. Know your credit.

Your credit score will ultimately determine the types of loans that are available to you so it's important to understand what your credit rating is and how, if possible, you can improve it. It's important to remember that a potential lender will check your credit immediately so it's best to clear up any credit problems before you apply for a mortgage. However, don't be discouraged if your credit is less than perfect -- there are a variety of lenders that specialize in sub-prime financing, although you'll probably pay more in the form of a higher interest rate.

3. Learn your loan.

Today, loan terms are as diverse as the organizations that provide them, so be sure to do your homework to find a mortgage that best suits your needs. In addition to the typical 30-year and 15-year fixed rate mortgages, there are plenty of other options to choose from, including adjustable rate mortgages (ARMS) where the interest rate can vary over time, hybrid ARMS, jumbos, assumables and seller financing. GoApply.com offers a variety of mortgage information resources, including news articles, financial guides, a mortgage calculator, FAQs, a glossary and a mortgage checklist to help you determine which loan is right for you.

4. Organize your paperwork.

If you're in the market for a home loan, lenders will require important financial information from you. Some general documentation you can expect to provide includes W-2 statements from the previous two years, federal tax returns from the previous two years, recent paycheck stubs, documents showing other sources of income such as second jobs, overtime, commissions and bonuses, interest and dividend income, Social Security payments, VA and retirement benefits, alimony or child support. Additionally, you'll probably be asked to provide a complete list of your creditors, such as credit cards, student loans, car loans and child support payments. And don't forget investment records such as mutual fund statements, real estate and automobile titles, stock certificates and records of any other investments or assets. Be sure to organize your paperwork ahead of time so you're prepared to present this information to your lender at processing time.

5. Find a lender.

Finding the right lender is an important step to ensuring a positive loan experience and online lending is becoming an increasingly popular way to finding the perfect financing partner. The lowest rate doesn't always mean the best loan -- in addition to annual percentage rate, be sure to check points (pre-paid mortgage interest which will increase your upfront costs) and other fees associated with a given loan. Compare mortgage loan offers and talk to several lenders before you apply for your loan.