Obtaining a mortgage can be a lengthy and difficult process, but it can be made less so with a little advance effort. Most people know they will want to start house-shopping, or planning for a refinance, at least a few months in advance; as soon as this happens, a focus should be put on getting out of debt and saving for a down payment. The less debt an individual has, the more likely he or she is to get approved for a mortgage and for a lower interest rate. A sizable down payment goes along with this; 20 percent is the standard for obtaining a mortgage, but some people elect to put down more or less than that amount.
It is crucial to determine if it will be a joint or individual application before starting the process of obtaining a mortgage. If both people have good credit histories and high credit scores, a joint application can be a benefit. If one person has good credit and another has poor, however, the mortgage lender will base the loan on the second person's poor credit, and it can actually end up doing more harm than good. Meeting with a loan officer to discuss interest rates, the lending process, and the application can be very helpful. The loan officer will also tell applicants what information they need to provide, such as tax returns, bank statements, and other proof of income.
A credit score and solid history is one of the most important things to consider when obtaining a mortgage, as well as the amount of open credit that one has. A high credit score will lead to a reduced interest rate; credit cards that have been paid off, and other loans where the borrower paid or pays as agreed, indicate that the person is a good credit risk. A moderate amount of available credit is preferred, because an individual with a great deal of open credit can be a credit risk. It is a delicate balance that a lender can help to explain in more detail, but it is a good idea to start paying down credit cards as soon as possible.
In addition to stable personal finances, a good down payment will generally be necessary for obtaining a mortgage. Twenty percent of the purchase price, or more, is best to get a low interest rate and avoid having to pay private mortgage insurance (PMI). Some banks will be willing to finance a home with a smaller down payment, or even zero-down, but this will be a much more difficult process, even for people with stellar credit.