To secure a mortgage loan in the United States, individuals must first assess their financial readiness. This involves checking their credit score, which is a critical factor for loan approval and interest rates. A higher credit score typically qualifies borrowers for lower rates. Next, they should save for a down payment, which is usually 3% to 20% of the home’s purchase price. A 20% down payment eliminates private mortgage insurance (PMI), reducing long-term costs. Borrowers must also gather documentation such as pay stubs, tax returns, bank statements, and W-2 forms. Pre-approval from a lender strengthens their position in a competitive housing market. Finally, selecting the right loan type—fixed-rate, adjustable-rate, or government-backed (e.g., FHA or VA loans)—depends on the borrower’s financial goals and risk tolerance.

The steps above are essential because creditworthiness directly impacts loan terms. For example, a FICO score below 580 often results in loan denials, while scores above 760 qualify for the lowest interest rates. According to the Consumer Financial Protection Bureau (CFPB), 57% of mortgage applications in 2022 were denied due to insufficient documentation or poor credit. A 20% down payment not only avoids PMI but also reduces monthly payments by up to 30%, as shown by the Federal Reserve. Pre-approval increases offer acceptance chances by 40%, per the National Association of Realtors. Additionally, government-backed loans like FHA mortgages require only 3.5% down but demand mortgage insurance, costing 0.5% to 1.5% of the loan amount annually. These factors collectively determine affordability and borrowing costs, making preparation and research critical for success.