If any of your friends or family have recently applied for a home loan, you've probably heard that lenders are nervous, with tough new rules and demands for stacks of paperwork. Good mortgages are still out there, but you should be prepared before applying.
First, understand how your credit score impacts the interest rate charged on your loan. If your score is 720 or higher on the scale of 850, you will qualify for the best rates. If it's between 700 and 719, you could expect 0.375% added to that rate, while a score between 680 and 699 might add 0.5%.
Next, determine how much you have available for the down payment, and how that will affect your loan's terms. A "conforming loan" that would be purchased by Fannie Mae or Freddie Mac will require a minimum of 10% down payment.
However, if you don't have that much to put down, you may qualify for a Federal Housing Administration (FHA) or Veterans Administration (VA) loan. These government-backed loans are targeted towards those with lower credit scores and FHA only require a 3.5% down payment and it's possible to get a VA loan with no downpayment.
You'll need to have your employment, banking, and tax records organized, and be patient while overworked lenders review your application. It will certainly be worth your effort when you move into your new home.
