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5 Steps to Take Before Applying for a Mortgage

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Purchasing a home is an exciting process, but it can be complicated if you're unprepared.

Before you apply for your mortgage, take these five steps:

  1. Determine how much house you can afford
    Evaluate your financial situation. Mortgage lenders don't just look at your income and assets—they'll also look at liabilities and obligations like auto loans, credit card debt, child support, potential property taxes and insurance, and your overall credit score.

    Many lenders follow the 28/36 rule, meaning your monthly mortgage shouldn't be more than 28% of your gross income, with overall recurring debt payments at no more than 36%. Use a calculator, like Mountain America Credit Union's mortgage qualifier, to determine how much you can comfortably borrow.

  2. Get your credit score in tip-top shape
    As mentioned, your credit score is one of the first things lenders review when deciding whether to approve or deny your mortgage application. Ensure your score is at its best before you apply.

    First, check your score with all three major credit bureaus: Experian, TransUnion, and Equifax, once a year for free. Most credit card providers and some financial institutions offer a complimentary check as well. 

    Though minimum credit scores vary depending on the type of loan you want, count on a minimum score of 500. For optimal interest rates, however, you should aim for 620 and above. If you're looking to improve your credit score, follow a budget, pay bills on time and get rid of debt.

  3. Decide on a down payment
    Once you know how much you can afford to borrow and what your credit score is, you'll need to decide how much you should put down.

    Depending on the loan, there will likely be a minimum down payment. Count on paying at least 3% of the property’s purchase price—but aim for 20%. If you pay less than 20% upfront, you may have to pay mortgage insurance or other fees.

  4. Gather your documents
    Obtaining a mortgage is a big step. Your lender will want to ensure your financial situation and identity are both in order.

    Have the following documents ready when you apply:

  • Three months of pay stubs

  • Three months of bank statements

  • Tax filings from the past three years.

  • Multiple forms of ID, including your driver’s license, social security card or passport

  1. Do your research
    There is a lot you need to know before you officially apply for a mortgage. Ask yourself the following questions before making a final decision:

  • What type of mortgage is best for you?
    There are multiple types of mortgages, which usually differ based on down payment size, personal qualifications or property type. Mountain America Credit Union has information on many different home loans to help you decide on the best one for your individual needs.

  • What’s the housing market like?
    Get a better idea of what the real estate market looks like in your area. Find out about average property prices and the equity potential of your local market before moving forward with a mortgage. A real estate agent can also be a good resource.

  • Is this the right lender for me?
    You've got your financials in order with the necessary documents. All you need now is the right lender. Find one that works well with you and your requests. Ask friends or family members about their experiences to help you find the best option.

Once you've completed these five tasks, you'll be well on your way to owning your first—or next—home. Visit for additional resources to guide you forward on your financial journey.

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