How to get a home loan: Top 10 tips

Buying a home can be an exciting experience and may lead to a brighter financial future. However, finding the right home and choosing the right home loan requires careful consideration. Here are ten tips to help make finding the right home loan as easy as possible.

Tip #1 – Start saving for a down payment

Depending on your lender and the type of loan you choose, your required down payment can typically range from 3.5% to 20% of the home’s purchase price. Establishing a monthly budget may help you put away enough money for your down payment.

Once you’ve worked out your budget, you could automatically deposit money each month from your paycheck or bank account to a savings account.

If you can’t produce a large amount of funds, look into an FHA loan, which requires a down payment as low as 3.5%.

Tip #2 – Check your credit report

Building a solid credit profile may help you get the best deal on your home loan. So, it’s a good idea to obtain a copy of your credit report before starting the home buying process. That way you can see what your credit looks like to potential lenders and work towards taking steps to improve.

You can receive one free copy of your credit report every year from each of the three major credit reporting agencies – Equifax®, Experian®, and TransUnion® – by visiting AnnualCreditReport.com.

Tip #3 – Get your financial documents in order

When you apply for a mortgage, you may need to provide your lender with several financial documents. Having these documents ready could speed up your loan application.

Typically, you will be asked to provide your last two pay stubs, your most recent W-2, your last two years of tax returns, and current bank statements.

Tip #4 – Use a mortgage calculator

Mortgage calculators are great tools for understanding how much home you may be able to afford. They can be easy to use and show what your monthly mortgage payment could be with different home price, down payment, and interest rate scenarios.

Check out a variety of mortgage calculators from Discover® Home Loans.

Tip #5 – Learn how to compare offers

Mortgages are not created equal. Even if loans have the same interest rate, there could be differences in fees and points that make one offer more expensive than another. Understanding all the components that go into mortgage pricing helps you compare different loans.

Tip #6 – Start tracking interest rates

Your interest rate is a key factor when determining the cost of your mortgage. Interest rates for mortgages change almost every day so knowing which way they’re  heading is useful.

Tip #7 – Get pre-qualified

Many real estate agents want you to be pre-qualified for a loan before they work with you. The mortgage pre-qualification process can be simple, usually requiring a credit check and financial information such as your income, savings and investments.

Once you’re pre-qualified, you will have a better sense of how much you can borrow and the price range of the homes you can afford.

Tip #8 – Understand your loan options

Maybe your parents had a 30-year fixed-rate loan, or your best friend has an adjustable-rate loan. That doesn’t mean either of those options are right for you.

Some people like the predictability of a fixed-rate loan, while others might prefer the lower initial payments of an adjustable-rate loan. Every homebuyer has their own unique financial situation, so find out which type of loan best suits your needs.

Tip #9 – Respond to your lender quickly

After applying for a home loan, try to respond promptly to any requests for information from your lender and return paperwork as quickly as possible.

Waiting too long could delay your loan, which might cause a problem with the property you want to buy. Don’t put yourself in a position where you may end up losing your dream home and any deposit you put down.

Tip #10 – Keep your credit strong 

Lenders may pull your credit report a second time to see if anything has changed before your loan closes. So don’t do anything that might lower your credit score while your loan is processing.