Loan Approval Process

Guidelines and Requirements

What Is a Loan?

In the mortgage industry, a loan is essentially the same as a loan in any other industry: a set amount of money loaned to a borrower to be paid back over time (with interest, of course). Lenders make money on loans by charging a certain amount of interest on loans of different kinds, but this is just part of the business. If you want to pay less total money by the end of your loan period, you'll want to pay it back as quickly as possible so the interest has less time to accrue, but you'll also want to find the lowest rates possible.

Taking out a loan is a standard way to buy a house, as very few people short of movie stars, CEOs, and NFL quarterbacks can afford to do so outright. If you're looking to buy a house for the first time and are asking What is a loan?

Can I Afford a House?

That's no simple question. There are quite a few considerations you'll have to make when trying to figure out if you can afford a house, some of which require some speculation on your end. First you'll have to decide if you're really interested in keeping the same home for years on end. Though we contemporary Americans statistically keep our homes for significantly less time than our forefathers, most financial experts will recommend that you be willing to stay in your home for at least 5 years.

If you think you're ready to seriously consider home buying, you'll need to know your credit score/credit history, your annual salary/job security, what size home you'll need, and where you're looking to live. All of these aspects play a big role in answering Can I afford a house? Just don't forget that pre-qualification letter before you start trying to talk to realtors.

When you have all of your home preferences and financial information ready, then it's time to call or email a representative to help you figure out the best options.

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Quick Facts

  • A loan is money paid back over time with interest.

  • You should be willing to stay in a home for at least five years.

  • You must seriously consider your financial condition when seeking a mortgage.