How to Get a Mortgage

Before you start your home-buying journey, you need to know how to get a mortgage. Taking on a loan to finance the purchase of your home is one of the biggest financial decisions you'll ever make. 

If you've never applied for one before, the mortgage process can feel complicated and stressful. You might be wondering how to get approved for a mortgage, what score you need, and how much home you can afford. The good news is that the process is more straightforward when you break it down step by step.

Our guide explains how to get a mortgage so you feel confident every step of the way. Here's what you need to know. 

How to get a mortgage step by step

Step 1: Check your credit and finances

Your credit report and score are two of the most important factors in the mortgage approval process. Get a copy of your report and look for any errors. If your score needs work, start improving it before applying.

Key areas lenders review include your credit score, debt-to-income ratio, income and employment history, assets and savings, and your credit history.

Step 2: Save for a down payment

You'll need a down payment to buy a home. The exact amount depends on the loan type, but most require between 3% and 20% of the home's purchase price.

Step 3: Get pre-approved

A mortgage pre-approval shows sellers you're a serious buyer and tells you exactly how much you can borrow. During pre-approval, the lender will verify your income, assets, and credit.

Step 4: Choose the right loan type

Different loan types have different requirements. FHA loans allow lower credit scores and smaller down payments. Conventional loans offer more flexibility but require stronger credit. VA and USDA loans have specific eligibility requirements but offer favorable terms.

Step 5: Shop multiple lenders

Even a small difference in your interest rate can add up to tens of thousands of dollars over the life of your loan. Compare quotes from at least three lenders.

Step 6: Make an offer and go through underwriting

Once your offer is accepted, the lender will complete underwriting, which verifies all of your financial information and orders an appraisal of the property.

Step 7: Close on your home

At closing, you'll sign your loan documents, pay closing costs, and receive the keys to your new home.

What credit score do you need for a mortgage?

Your credit score significantly influences what loans you can qualify for and the interest rate you'll receive.

Use our mortgage calculator to estimate how different interest rates affect your monthly payment and total loan cost.

If your score is below where you need it to be, use the months before applying to pay down credit card balances, make all payments on time, and avoid applying for new credit. The pre-qualification process can help you estimate your rate without a hard credit pull.

FHA vs. conventional loans

FHA loans require a minimum score of 580 with 3.5% down. They also require private mortgage insurance for the life of the loan unless you refinance. Conventional loans require a score of 620 or higher and allow you to cancel PMI once you reach 20% equity.

Conclusion

Getting a mortgage takes preparation, but it's an achievable goal. Start by reviewing your credit, saving for a down payment, and getting pre-approved. If you need to strengthen your credit first, Kikoff can help you add positive payment history quickly. 

Build credit responsibly with Kikoff's plans.