A mortgage is a loan specifically used to purchase real estate. You borrow money from a lender to buy a home, then repay it over time—typically in 15 or 30 years—with interest. The home serves as collateral, meaning the lender can take possession (foreclose) if you fail to repay.

Step 1: Check Your Credit Score

Before applying for a mortgage, check your credit score. Most lenders look for a minimum score of:

• 620 for conventional loans

• 580 for FHA loans (with 3.5% down)

• 740+ for the best interest rates

You can get free credit reports from Equifax, Experian, and TransUnion via AnnualCreditReport.com.

Step 2: Determine Your Budget

Use the 28/36 rule to estimate what you can afford:

• Spend no more than 28% of your monthly income on housing costs.

• Keep total debt payments under 36% of your income.

Online mortgage calculators can help estimate your monthly payment, including principal, interest, taxes, and insurance (PITI).

Step 3: Save for a Down Payment

How much do you need to save?

• Conventional loan: 3–20% down

• FHA loan: as low as 3.5% down

• VA/USDA loans: 0% down (if eligible)

Keep in mind, putting down at least 20% avoids private mortgage insurance (PMI), which adds to your monthly cost.

Step 4: Get Pre-Approved

A mortgage pre-approval letter shows sellers you’re a serious buyer. To get pre-approved, lenders will review your:

• Credit report

• Employment history

• Income and assets

• Debt-to-income ratio (DTI)

This step gives you a clear idea of your price range.

Step 5: Understand Mortgage Types

There are different loan types to consider:

• Fixed-Rate Mortgage: Stable monthly payments; ideal if you plan to stay long-term.

• Adjustable-Rate Mortgage (ARM): Lower initial rates, but rates adjust over time. Good for short-term buyers.

• FHA Loans: Easier credit requirements; great for first-time buyers.

• VA Loans: Available to military veterans; no down payment required.

• USDA Loans: For rural areas; low income requirements, no down payment.

Step 6: Find the Right Lender

Compare lenders to find the best rates and terms. Look at:

• Interest rates (fixed vs. variable)

• Annual Percentage Rate (APR)

• Closing costs and lender fees

• Customer service reputation

• Loan processing timeline

Get quotes from at least three lenders.

Step 7: Submit Your Application

Once you’ve selected a lender and found a home, complete a full mortgage application. Be ready to provide:

• Pay stubs, W-2s, and tax returns

• Bank and asset statements

• Debt statements (credit cards, student loans, etc.)

• Photo ID and proof of address

The lender will order an appraisal and underwrite your loan.

Step 8: Close on Your Home

If your loan is approved, you’ll move on to closing. This includes:

• Reviewing and signing loan documents

• Paying closing costs (2–5% of home price)

• Final walkthrough of the property

• Receiving the keys to your new home

Buying your first home in the U.S. can be both exciting and overwhelming, but with the right preparation and knowledge, you’ll be better equipped to make confident, informed decisions. Start with your credit, understand your loan options, and always work with trusted professionals throughout the process.