Pre-qualification
1. Pick a loan term
Short-term loans can mean higher monthly payments but a lower total cost over the loan term. Long-term loans may mean lower monthly payments but greater interest payments over the term.
2. Pick an interest rate
Fixed-rate home loans are less risky because the interest rate remains the same throughout the loan term. Adjustable-rate loans can offer a lower initial interest rate but adjust to fluctuations in the market.
3. Pick a loan type
Conventional
• Not guaranteed by the U.S. government
• Conform to Fannie Mae and Freddie Mac (Fannie Mae and Freddie Mac are U.S.-sponsored mortgage securities dealers)
• Less money on mortgage insurance, fewer steps to closing
• $424,100 loan limit
FHA
• Guaranteed by the Federal Housing Authority
• Option for first-time homebuyers
• Available to lower credit borrowers
• Available to borrowers with smaller down payments
• Loan limits vary by county
VA
• Guaranteed by the U.S. Department of Veterans Affairs
• Eligible veterans, service members, surviving spouses
• No down payment required
• No mortgage insurance
• Capped closing costs
USDA
• Guaranteed by the U.S. Department of Agriculture
• Designed for low- to moderate-income borrowers
• Must meet property eligibility requirements
• Up to 38-year loan term
• No down payment required
4. Apply for loan estimate
• Name
• Date of birth
• Income
• Employment history
• Residence history
• Social Security number
5. Check credit history
• Target score range 620-740+
• No foreclosures in last 7 years
• No bankruptcy in last 4 years
• No liens
6. Calculate debt-to-income ratio
Take into account:
• Credit card debt
• Student loans
• Installment loans
• Cosigned loans
Medical debt is not considered
Pre-qualification approved
Steps to homeownership
A real estate broker can help find that affordable dream home. Closing costs should be considered.
