How to shop for a mortgage?

If you’re in the market to buy a house you’ll likely need a mortgage that matches your financial needs. You need to consider not just the principal and interest, but also closing costs, insurance, property taxes, and other costs. These are the factors you need to consider while shopping for a mortgage:

• Credit score: Your credit score is an important factor that influences how much interest you’ll pay on any potential mortgage. A good credit score — usually above 620 — gives you a good chance to qualify for any type of loan including government-backed or conventional loans. Government-backed loans are less strict with their credit score requirements and you will be able to get a loan if your score is 580 or above. Any lower than that, you’ll likely not get approved or may have to pay a higher interest rate. It might be a good idea to hold off taking out a mortgage and take time to rebuild your credit score for some time before applying for a mortgage.
• Type of loan: You may qualify for different types of loans based on your employment type or location of your property and even whether you are a first-time buyer. 

U.S. Department of Veterans Affairs (VA) loans, for instance, are exclusively for people currently in or retired from military service, including any surviving spouses. These loans don’t require a downpayment and may also have lower interest rates. 

Federal Housing Administration (FHA) loans are also government-backed and protect lenders from risks involved in lending to people with lower credit scores or less income. However, these loans require at least 3.5% of the down payment and mortgage insurance premiums (MIP). 

United States Department of Agriculture (USDA) loans are only meant for properties in certain eligible rural areas. These loans don’t require a down payment, have low-interest rates, and are meant for people with low to moderate incomes. 

• Compare quotes: Interest rates, closing costs, and other expenses vary among lenders. Make sure to get quotes from several lenders and compare them to see which one suits you best. You could also consider consulting a mortgage broker for a fee who’ll help you get multiple lender quotes based on your income, credit score, and other factors. 
• Keep your documents ready: Your bank statements, pay stubs, investment statements, documents related to other assets like property, recent tax returns and W-2 forms, debt payment documents, and any other information that can give lenders a more accurate picture of your current financial situation. 

Choose the lender that gives you the best deal and secure your loan. Make on-time payments and maintain overall good credit behavior with other debts as well. Make sure your debt-to-income ratio is low by paying off any debts you may have as early as possible.