So you’ve finally found your forever home—congratulations!
Of course, before you can secure this dream house as your own, you’ll have to navigate the complex mortgage process. Even veteran home buyers struggle when it comes to knowing how to get a mortgage.
With this step-by-step guide, we’re taking a little of the mystery out of the home loan process. Here’s exactly what you’ll need to do when getting a mortgage.
1. Get Your Finances in Check
Before you go any further, make sure you’re financially prepared for the mortgage.
Check your credit score, and do whatever you can to improve it. This might mean following best practices to clean up your credit. Make sure you also have enough saved for your home’s down payment and closing costs.
2. Think About Your Down Payment
For most lenders, a reasonable down payment will be 20% of the purchase price. If 20% is out of reach, it’s not the end of the world—but if you can afford it, you won’t have to pay private mortgage insurance (PMI), which tacks on an extra fee.
3. Choose the Right Mortgage
When taking out a mortgage, it’s important to remember that there are many types to choose from. Depending on your finances and preferences, you may want to consider popular options like fixed-rate and adjustable-rate loans, or alternatives like government-insured loans. Each loan will have different interest rates and requirements for the down payment, so work with a lender to find the right option.
4. Get Pre-Qualified or Pre-Approved for the Mortgage
Through the informal pre-qualification process, you’ll sit down with a lender to answer basic questions about your finances. From there, they can let you know whether you qualify for a mortgage. This isn’t a guarantee, but it can help you understand whether you can actually afford the home you want.
Pre-approval, by contrast, is a little more involved, and it requires formal paperwork about your finances and employment. However, the extra steps also mean you’re more likely to get the loan, though it’s still no guarantee.
5. Choose a Lender and Apply
Even if you’ve opted to get pre-qualified or pre-approved, you don’t need to apply for a loan through the same mortgage lender. Take your time to go shopping for the best lender and interest rates to suit your needs.
Whichever lender you choose, keep in mind that loan and mortgage processing can be complex, so be sure to have your financial info and documents ready to go to avoid delays.
6. Close on Your New Home
Once you’re approved, it’s time to close on your new home! After the closing, your mortgage will become official. Don’t forget to bring closing costs, which are often 2-5% of the purchase price of your home.
Know How to Get a Mortgage Before You Start
Knowing how to get a mortgage before you dive into the process can mean the difference between constant headaches and securing your new home. Even if your finances aren’t where you want them to be, using the guide above and working with the right lender can help you find the best mortgage for your needs. Don’t hesitate to reach out to an expert for assistance!
Looking for more of the crucial tips you need in life? Check out our other guides for insights.