Assess Your Financial Health and Credit Score
Before starting the home loan process, evaluate your financial situation carefully:
- Credit Score: Check your score through AnnualCreditReport.com or Credit Karma. Aim for 700+ for better terms, though FHA loans may accept scores as low as 580.
- Debt-to-Income Ratio (DTI): Lenders typically prefer 36% or less
- Savings: Prepare for down payment, closing costs, and emergency funds
Key actions to improve credit:
- Pay bills on time
- Reduce credit card balances
- Avoid opening new credit accounts
- Dispute any credit report errors
Calculate Your Budget
Financial experts recommend spending no more than 28% of your gross monthly income on mortgage payments.
Consider these factors:
- Monthly income
- Existing debt payments
- Estimated property taxes
- Insurance costs
- HOA fees (if applicable)
Use an online mortgage calculator to estimate payments based on different scenarios.
Down Payment Requirements
| Loan Type | Minimum Down Payment |
|---|---|
| Conventional | 3-20% |
| FHA | 3.5% |
| VA | 0% |
| USDA | 0% |
Gather Documentation
Income Verification
- Last 2-3 years of W-2s
- Recent pay stubs
- Tax returns
- 1099 forms (if self-employed)
Asset Documentation
- Bank statements
- Investment account statements
- Retirement account statements
- Gift letters (if receiving assistance)
Explore Loan Options
Conventional Loans
- Higher credit requirements
- Lower fees
- PMI required with less than 20% down
FHA Loans
- More flexible credit requirements
- Lower down payment options
- Mandatory mortgage insurance
VA Loans
- Available to veterans and active military
- No down payment required
- Competitive rates
For more information, visit the Consumer Financial Protection Bureau website.
Get Pre-Approved
- Submit financial documentation
- Authorize credit check
- Apply with multiple lenders to compare offers
- Review pre-approval letter details
- Receive maximum loan amount
Find a Real Estate Agent and Start House Hunting
Look for agents with:
- Experience in local markets
- Strong reputation and references
- Excellent communication skills
Consider these factors when searching:
- Location and proximity to amenities
- Size and layout for current/future needs
- Property condition
- Required repairs or renovations
Complete the Loan Process
After your offer is accepted:
- Schedule home inspection
- Complete appraisal
- Submit to underwriting
- Review closing disclosure
- Conduct final walkthrough
- Attend closing
Maintain Your Qualification
Avoid these mistakes between application and closing:
- Making large purchases
- Changing jobs
- Opening new credit accounts
- Missing payments
- Making undocumented large deposits
For additional resources, explore the Federal Housing Finance Agency and HUD websites.