Making the buying decision
Final Loan Approval
Lock Your Rate

Begin your decision-making process by analyzing the financial aspects of home ownership. You may find our Rent vs Buy Calculator to be a valuable tool for your analysis. Understand that there are many good reasons to buy which can't be measured with a calculator--your long-term security and leaving something to your children, for example. May it suffice that we briefly direct your attention to such matters and move on.

Assuming you plan to own your home for several years and can afford the payments, you'll likely be better off owning versus renting. Here are some points to consider:

• What are my reasons of owning a home?
  Do you need a bigger home? Do you need a better neighborhood? Are you speculating that prices will increase? Whatever your reasons, it helps to write them down. Seeing your reasons on paper helps create objectivity, and will help you follow through in the event you get the "jitters" later on.
• Do I have enough cash for the down payment?
  While this is certainly an important consideration, many lenders today offer zero-down and low down payment loans. However, you may still have to come up with cash for closing costs and moving expenses.
• Can I afford to make house payments in addition to making payments on my other debts?
  This is probably the single, most important question to answer accurately. Spend adequate time creating a realistic budget. If you fall too far behind in your mortgage payments or property taxes, you'll probably lose your home and any equity you might have had in it. Generally, you should spend less than a third of your gross income on your total housing expense, including principal, interest, taxes and insurance.

Perhaps you were pre-approved prior to or during your home-hunting activities. Pre-approval can take place in the absence of having identified a home to purchase.

When you enter into a contract to purchase your home, you begin the process of obtaining final loan approval. To convert your pre-approval to final loan approval, the main items the lender needs include the appraisal, purchase contract and title information. Your real estate agent, loan agent and attorney (where applicable) will be instrumental in providing these documents to the lender.

If you were pre-approved, you probably gave many of these documents (below) to your lender. Review the list to make sure the lender has current documents. If you're just beginning the approval process and the lender will be verifying your income, assets and liabilities, you'll need to gather these documents:

• Copy of purchase contract
• Copy of sales contract on real estate you are selling
• Divorce or separation documents
• Bankruptcy files
• Relocation agreement
• Copy of most recent Social Security check
• Award letter and copy of most recent checks for disability, retirement, or legal settlement
• Recent statements for all credit card accounts
• Bank and financial brokerage account statements for the previous three months
• IRA, Keogh and 401(k) statements for the previous three months
• Title documents for automobiles under five years old

• (Documents in section A.)
• Pay stubs for the previous 30 days
• W-2s for the previous two years
• 1099s for the previous two years

• (Documents in section A.)
• Federal tax returns for the previous two years
• Year-To-Date Profit-and-Loss statement for your business

Locking your loan must be done prior to closing. If  rates are rising, you may benefit by locking your loan early in the loan application process. If rates are stable or falling, you may benefit by waiting until the last possible moment to lock your loan. The shorter the time period between the lock and closing dates, the lower the loan fees and interest rate.

A lock-in, or rate commitment, is a lender's promise to close your loan at a certain interest rate and number of points. Depending upon the lender, you may be able to lock upon submitting your application, during application processing, upon loan approval, or later. A lock protects you against rate increases while your application is being processed. However, a locked-in rate could cost you money if rates drop and you want a lower rate.

You will need to lock the rate prior to closing. There are five components to a rate lock:

• Loan program
• Loan amount
• Interest rate
• Points
• Length of the lock