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Applying for a Loan

Shopping interest rates

You may discuss with your lender whether interest rates are likely to rise while your loan is being processed. If you anticipate rising rates, it might be a good idea to "lock in" the current interest rate. When you lock in a rate, you may have to pay points to guarantee the rate. (Your lender can provide more specifics about this option.) A point equals one percent of the loan amount. So, if you are applying for a mortgage totaling $120,000 one point would equal $1,200.

You should know the interest rate and APR, Annual Percentage Rate, and to keep the quoted rates in mind when shopping for a mortgage loan. It's also important to consider other fees that the lender can add on that might make a lower interest loan actually cost you more money than a mortgage with a higher rate but less miscellaneous costs.

If you lock-in, it's important to get an agreement in writing that lists when the lock-in takes effect and how long it remains applicable. The length of the lock-in should last through the closing on your loan. Lenders typically provide a variety of "lock options," and they can help you select the one that best fits your needs.

In most cases, once you've signed the loan application, you will have to accept the terms of the loan if it's approved. So, you should make sure your loan application contains terms and amounts that are acceptable to you.

If your application for financing is denied, you may have to pay the lender's processing fees -- which may include, but are not limited to, an application fee and a credit report fee. You should try to identify the reasons your application was rejected. Perhaps you need to improve your credit rating before you can qualify for a loan. If you have limited funds in your savings or checking account, or you have inadequate funds for a down payment you may need to investigate other loan programs. Your lender can provide additional information if needed.