- 1). Determine which lender you will apply with. You may already have a first mortgage with a lender, but you can still check the rates and fees of other lenders. When you compare terms and conditions you have an opportunity to receive lower interest rates and pay fewer fees. Perhaps your first mortgage lender can offer you some discounts because you are already a customer. Make a list of all the different aspects, terms and conditions of every lender you are considering, then make a decision.
- 2). Apply with the lender of your choice. When you are ready to apply you can call the lender or visit the bank. A credit analyst or credit correspondent will take an application from you that include your name, address, Social Security number, date of birth and place of employment. Chances are you will need to come up with some personal references. They will discuss all of the fees and costs involved. Some of the costs you could incur are an appraisal, title insurance and credit report. Ask about the interest rate and any adjustments that may take place in the future. Check for annual fees.
- 3). Wait for the credit report. Your lender will get a copy of your credit report. A credit report can help determine what interest rate you will receive. The better your credit score, the lower your interest rate will be. A credit score is used by lenders to determine your level of risk. Lenders also want to make sure you don't have too much debt.
- 4). Review the appraisal figure with the lender. When the appraisal has been completed you will be able to know how much money you can borrow. If your home is valued at $200,000 and you owe $120,000 the amount of equity in your home is $80,000. You may be able to borrow up to your equity. This will depend on the lender and your situation. Some lenders will loan out a percentage of the appraisal value, which is the LTV figure. You will be given a credit limit based on your characteristics, which may be less than the amount of equity you have.
- 5). Sign the loan papers. When you loan is approved it is time to sign the paperwork and receive your copies. The lender will explain the payment amounts, and when the first payment will be due. They will also explain how funds are accessed. You may decide to have money transferred into your bank account or you could use the convenient checks provided by the bank.
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