If you’re like many people, you’ve never gotten a mortgage loan before – but you’re in luck. This is the complete guide on how to get a mortgage for first-time homebuyers.

First-Time Buyers: Your Complete Guide on How to Get a Mortgage

Most people have to take out a mortgage loan in order to buy a home; it’s pretty uncommon for someone to have hundreds of thousands of dollars lying around, just waiting to be spent on a house. The fact that you most likely need a mortgage means that you’ll have to talk to lenders – preferably at least three – to find out what loan products and types are right for your needs.

In order to get a mortgage, you need to:

  • Get your finances in order
  • Research various loan types
  • Compare different lenders
  • Apply for preapproval

Here’s a closer look at each.

Related: 3 mortgage myths to ignore

Step #1 in Getting a Mortgage: Get Your Finances in Order

Lenders will only approve people for mortgage loans if they (the lender) feels that the borrower is a low enough risk. If a lender feels you’re too risky (meaning that you won’t pay the loan back), it will deny you a loan.

You can show lenders that you’re a low risk by:

  • Brushing up your credit score (paying down debt, making all your payments on time, and getting mistakes taken off your credit report)
  • Lowering your debt-to-income ratio by paying off debt and lowering the monthly debt payments you’re required to make
  • Saving up money – at least enough for a reasonable down payment

Related: Do you really need preapproval to buy a home in Midland?

Step #2 in Getting a Mortgage: Research Various Loan Types

There are several different types of loans, and it’s in your best interest to know what you want (or at least have a rough idea of what you want) before you start talking to lenders. These are the major loan types:

  • Conventional mortgages. These loans often require you to have a credit score of at least 620 and put down between 3 and 20 percent of a home’s purchase price.
  • FHA loans. These loans are backed by the U.S. government’s Department of Housing and Urban Development, or HUD. You may be able to borrow an FHA loan with a credit score as low as 500.
  • USDA loans. These loans are backed by the U.S. Department of Agriculture, and they’re generally only available in specific locations (such as rural areas). You may be able to borrow a USDA loan with a credit score of 640.
  • VA loans. VA loans are only available to honorably discharged veterans of the U.S. Armed Forces and qualifying dependents, as well as a small handful of government employees. These no-down-payment loans are backed by the U.S. Veterans Administration.

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Step #3 in Getting a Mortgage: Compare Different Lenders

It’s a good idea to talk to at least three different lenders before you settle on one to borrow from. That way, you’re exploring your options as far as loan products, terms and rates, and even the length of time to closing. Different lenders offer different loan products, and there’s quite a bit of variation in the interest rates some are willing to offer. It’s in your best interest to talk to as many lenders as possible before you make a commitment.

Related: 5 times you should offer over asking price for a home

Step #4 in Getting a Mortgage: Apply for Preapproval

After you’ve settled on the right lender for your needs, it’s time to apply for mortgage preapproval. For preapproval, your lender will need financial documentation from you – and it’ll need to check your credit. Your lender will likely ask for things like your most recent tax returns and pay stubs, and if you’re self-employed, you may need to provide a profit and loss statement. Every lender is different, but they’re all willing to tell you exactly what they need to process your loan preapproval.

Related: 5 things you have to do before you can move into your new home

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