1) Apply For Pre-Qualification

Knowledge is power. It's important to know your lending limit, monthly payment, loan type and cash needed.

When you apply for a pre-qualification, lenders take a look at your income, assets and credit, and tell you what each of these look like. This knowledge provides confidence in the purchasing process.

2) Recieve Pre-Qualification Letter

Once you find the best mortgage solution for your needs, you can see if you’re approved. If you are, you'll get a Pre-approval Letter that you can use to begin house hunting.

This allows your agent to submit this letter with any offers and also gives them your price point, type of loan and limits to allow the showing and offer process go smoothly.

3) Find A Property To Make An Offer

Now comes the best part – finding the home that’s right for you. Partner with your real estate agent to help you narrow your search and show you properties that fit both your budget and needs.

Once you find the right home, your real estate agent will also help you submit an offer, and potentially begin negotiating with the seller.

Conventional Loan

Conventional loans are the most popular option, although they have more stringent requirements set by Fannie Mae and Freddie Mac than government-backed loans offered by the FHA, VA and USDA.

A conventional mortgage preapproval is a good option if:

• You have a 20% down payment. Unlike government-backed loans, you won’t pay any private mortgage insurance (PMI) or guarantee fees if you can come up with at least a 20% down payment. Mortgage insurance repays lenders for losses if you default on your loan and they have to foreclose.
• You’re buying a second home or investment property. Conventional loans allow you to buy vacation or rental homes, while government loans are restricted to primary residence purchases only.
• You need higher loan limits than FHA loans allow. Homebuyers can borrow up to $647,200 for a single-family home in most parts of the country — much more than the $420,680 cap for most comparable FHA loans.

FHA Loan

The Federal Housing Administration (FHA) insures FHA loans for borrowers with lower credit scores and higher DTI ratios. The extra credit flexibility comes with hefty FHA mortgage insurance expenses. The upfront lump-sum mortgage insurance premium fee of 1.75% is added to the loan amount, along with an annual mortgage insurance premium fee of 0.45% to 1.05%, which is divided by 12 and added to your monthly payment.

An FHA mortgage preapproval is a good option if:

• You have credit scores below 620. FHA guidelines allow for scores down to 500 with a 10% down payment, and 580 with the minimum 3.5% down payment.
• You have a high DTI ratio. FHA lenders may approve you with a DTI ratio of 50% or higher if you have good credit or extra mortgage reserves.
• You want to buy a multifamily home with a 3.5% down payment. One unique feature of FHA loans is the ability to buy a two- to four-unit home with a 3.5% down payment, if you’re willing to live in one of the units and rent the other(s) for at least a year. An added bonus: You can qualify with the rental income on the unit(s) you don’t live in.
• You’re borrowing within the FHA loan limits for your area. You’ll be capped at $420,680 in most parts of the country, which will limit your borrowing power compared to conventional loans.

VA Loan

The U.S. Department of Veterans Affairs (VA) guarantees loans made to retired and active-duty military borrowers, reservists and eligible surviving spouses. VA borrowers with enough VA entitlement may buy a home with lenient credit requirements and no down payment. No mortgage insurance is required. Instead, a VA funding fee of 1.4% to 3.6% is charged based on your down payment and whether you’ve used your home loan benefits before.

A VA mortgage approval makes sense if:

• You have enough entitlement to buy a home with no down payment. VA borrowers must provide a certificate of eligibility (COE) that shows enough entitlement for a VA loan. It’s possible to buy more than one home with no down payment, which comes in handy for military families relocating due to military service.
• You want a no-down-payment loan for an expensive home. Loan limits don’t apply to VA loans, which gives eligible military borrowers an edge over civilian borrowers to buy higher-priced homes without a down payment requirement.

USDA Loan

The U.S. Department of Agriculture (USDA) guarantees loans for low- to moderate-income homebuyers in rural areas defined by the USDA. Borrowers can obtain no-down-payment financing, but pay two types of guarantee fees that work much like FHA mortgage insurance.

A USDA mortgage approval makes sense if:

• Your household income is within the USDA limits. The USDA loan is meant to help borrowers with limited earnings potential, and lenders scrutinize the income of the entire household, even if they aren’t on the loan. You can find the median income limits for your area on the USDA website.
• You’re buying a home in a USDA-designated rural area. Before you apply for a USDA loan, check the USDA property eligibility map to make sure the area you’re looking in is approved for USDA financing.