Before You Shop

Learning More About Homebuying and Home Loans

Deciding whether to borrow against the equity in your home? Learn more about home equity loans at Borrow Smart, offered by the BorrowSmart Public Education Foundation.

Determining What You Can Afford

Do you know how much your mortgage will cost and how much you can afford to pay? Visiting a financial counselor provides probably the best chance for making a smart decision, but there are many excellent online resources as well. There are many online mortgage calculators (such as these, offered by the American Bankers Association), which can assist you in calculating your mortgage payment and determining whether the payment will be affordable for you. The site also offers other personal finance calculators that can help you plan your budget to make sure you'll earn enough to pay your mortgage and other bills.

Should I be looking for a mortgage loan or some other type of credit?

While in some circumstances a mortgage loan may be your best source of credit, it is also potentially dangerous: if you can't pay the mortgage loan back - for whatever reason - you could lose your home!

Because of this potential danger, you should carefully consider your reasons for seeking credit -- especially mortgage credit - and ask yourself whether your reasons really are important enough to justify taking this risk?

Will the benefits I get from borrowing money secured by my home be great enough to justify taking this risk?

Some of the typical purposes for which you may want a mortgage loan include:

Home Purchase - actually buying a home.

Home Improvements or Repairs - making changes or repairs to your home that are truly necessary or will substantially increase the value of your home.


Most credit experts generally advise against using mortgage loans to get cash for less essential purposes, such as taking a vacation or buying an item that you may want but don't really need. You should also be very cautious about borrowing if your reason is to avoid foreclosure or a sale of your property for taxes. Borrowing under these circumstances may force you into a worse financial situation.

Debt Consolidation - paying off all or at least some of your existing higher-cost credit, such as credit card debt, with lower cost mortgage loans. But beware: you should not consolidate your unaffordable debts into a mortgage loan unless (1) it is going to lower your payments, (2) save you money and (3) you will not run up credit card and other debt after taking out the mortgage loan.

Improving your Financial Situation - for example, taking advantage of more advantageous loan terms, falling interest rates, better mortgage products, lowering your monthly payments or interest rate, or shortening your loan term.