Owning a home is still widely considered a major sign of having achieved the American Dream. Those who fell underwater on real estate during the market crash of 2008 and 2009 felt it was more of a nightmare. There have been changes in the mortgage market since the collapse of housing, but it is still possible for many Americans to get a loan for a home. 

Apply for a Mortgage

Applying for a mortgage requires a paper or an online application form. This is a requirement that the lending agency or bank will enforce on a prospective home buyer. Banks will want proof of income. This is increasingly important after the so-called “liar loans” that were common in the pre-crash period. People could then go in and state a given income without any proof and still get a mortgage. That did not work out well, and now banks will require proof that a borrower has a strong likelihood of being able to pay the loan back.

Check Credit Scores

It’s important for borrowers to check their credit scores before making an application. Those with low scores will be stuck with high-interest rates if they can get a loan at all. On the other hand, higher scores will generally result in more favorable terms for the borrower.

Do Not Necessarily Max Out the Purchase

Banks will usually give a maximum amount that they are willing to lend a borrower. Taking out a large loan can be a recipe for becoming house poor. The lower the percentage of a family’s monthly income that goes to a mortgage, the better and less stressful the mortgage payment will be.

Put a Healthy Amount Down

It’s possible to get a government-backed loan with 0 or 3.5 percent down. Most lenders that offer conventional loans that are not backed by the VA, the FHA or the USDA will require at least 5 or 10 percent down. However, a larger down payment will be even better. Those who can put come up with a down payment that’s 20 percent of the purchase price will be able to avoid private mortgage insurance, which is a hefty amount that goes toward protecting the lender should the borrower not pay.

Consider Fixed-Rate Loans

Many mortgages come with low teaser rates that readjust after a given period of time. These mortgages with variable rates can reset annually, and with interest rates still at historically low levels, it’s likely that rates will eventually go up. With higher rates over time, the monthly mortgage payments will also go up. The principal and interest due on fixed-rate mortgages will stay steady for the length of the loan, which takes out much of the guesswork.

Getting a loan for a home can be a stressful process. It doesn’t have to be. For those with good credit and a decent down payment, getting into a home should have much less stress associated with it.