Here are ten steps that can help you in getting a home loan:



Step 1: First and foremost, figure out how much you can afford. What you can afford or not depends a lot on your income, credit rating, current monthly expenses, down payment and the interest rate. The calculators can help you in this, but the best thing to do is to visit a lender to find out for sure. A housing counselor can also help you in figuring out how to manage and pay off the debt, and start saving for that down payment which you have to make.

Step 2: Know your rights ? It is advisable for every consumer to know his / her rights before taking up any kind of loan. This way no one can actually mislead you.

Step 3: Shop for your home loan - Save money by doing some homework in advance. Meet and talk to several lenders, compare costs and interest rates, and negotiate to get the best deal. Consider getting pre-approved for a loan.

Step 4: Educate yourself about home buying programs ? This will help you in the entire process of home buying.

Step 5: Shop for your dream home ? Before purchasing your dream home, it is important to choose a real estate agent. After that, make a wish list - what features do you want, home-shopping checklist - take this list with you when comparing homes.

Step 6: Negotiate or make an offer - Discuss the deal with your real estate agent. If the seller defies your offer, you may need to discuss the matter until you both agree to the terms of the sale.

Step 7: Get a home inspection done ? Make an offer which is contingent on home inspection. An overall inspection will tell you about the condition of the home which is being sold, and can help you avoid buying a home that needs major repairs.

Step 8: Remember to shop for homeowners insurance - Lenders require your homeowners insurance. Be sure to shop around for the same.

Step 9: Time to make the deal ? After the above mentioned steps, you're finally ready to make the settlement. Be sure to read everything thoroughly before you finally sign everything.

Step 10: The house is finally yours. Have a grand house warming party.

Following are the terms which are generally used for home loans. A brief description about them:

?EMI or Equated Monthly Installment means a fixed number of installments to be paid every month till the loan is paid back. A portion of EMI consists of interest and the principal.

?Floating Rate of interest - Rate of interest which varies as per the market lending rate. In such a situation, there an element of risk of paying more than budgeted amount in case the lending rates goes up.

?Monthly Reducing balance ? Under this system, interest reduces every month with repayment of the principal amount.

?Annual Reducing Balance ? In this, principal is reduced annually at the end of the year. So, you will end up paying interest even for the portion of principal you have actually paid back.

?Fixed rate of interest ? In this the rate of interest is fixed and remains unchanged throughout the period of the loan.

?Processing charge - It's a fee to be paid to the lender on applying for the loan.

?Prepayment Penalties ? When someone pays back the loan before the agreed term of the loan, then banks / institutions charge penalty for the prepayment.

?Commitment Fee - Some institutions charge commitment fees in case the loan is not availed within a specific period, after it has been processed and sanctioned.

?Miscellaneous Cost - It is possible that some lenders may charge a documentation or consultant charge, which is called as miscellaneous cost.

Just follow the above mentioned steps and remember the terms. It will help you in taking the best decisions.