20 Steps to Getting the Perfect Mortgage for You

When you borrow for your home, you'll be committing to paying a lot of interest over the course of several decades. Finding the most affordable loan for you is essential to avoid overpaying and ensure your monthly payments don't interfere with other financial goals.

To get the perfect mortgage for your situation, just follow these 20 steps.

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Your credit score is going to have a tremendous impact on the interest rate you owe on your mortgage loan. You need to know what that score is, and what factors are affecting it, before you apply for a loan.

That's essential since it can take time to make any necessary fixes if it turns out your score could hurt your rate. There are many free places to access both your credit score and report online, so before you begin the mortgage application process, pull yours up. You can get your score at Discover and your report at AnnualCreditReport.com, if you aren't sure where to look.

ALSO READ: 3 Reasons to Check Your Credit Reports Before the End of the Year

Credit report errors are more common than you'd think, with as many as one in five consumers dealing with a mistake on their credit history.

If inaccurate information on your credit report affects your mortgage rate, you could end up wasting thousands of dollars for no reason. Don't let that happen. Reach out to the credit reporting agencies well before you apply for a mortgage in order to get any errors addressed so they don't cause financial damage.

Sometimes, it's not an error on your report that's hurting your score but is instead a record of a late payment.

If you have negative information on your credit report that's damaging your credit, there's nothing wrong with asking your creditors if they'd be willing to voluntarily remove it.

Many are willing to take off a report of a late payment if it was a one-time miss. Others may be willing to remove a past delinquency if you pay up. There's no guarantee your creditors will cooperate, but there's also no harm in making the request to try to bring up your score.

ALSO READ: How Writing a Goodwill Letter Could Help Improve Your Credit Score

Paying off debt can improve your credit score as well, since your credit utilization ratio is a key factor in the scoring formula. Credit utilization is the ratio of available credit you've used. It should be as low as possible, and definitely below 30%.

Reducing your debt can also help your debt-to-income ratio, which is debt relative to what you earn. Mortgage lenders like your ratio to be below a certain threshold before they'll approve you for a home loan -- and the lower your debt is relative to your income, the less risk you'll present to a lender.

Mortgage lenders look at your income, as well as your credit history, when deciding if you should be approved for a loan.

In particular, they want to see that your earnings have been steady. That means job-hopping shortly before applying for a home loan could be a recipe for disaster. In fact, most lenders prefer to see a stable employment history over at least two years.

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As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

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Mortgage lenders won't necessarily count all your income when deciding how large of a home loan you should be approved for. That's an especially big problem for those who are self-employed.

You should ask potential mortgage lenders how they determine which income to consider when approving you for a mortgage. Some are more used to dealing with self-employed workers than others so may be more flexible in what earnings count.

Lenders generally aren't going to just take your word for it when you tell them how much you earn and what assets you own. You're going to need documentation such as tax returns, pay stubs, and bank statements.

It can take time to assemble all these documents, so start the process early so you're ready to provide the essential information to get approved for a home loan.

Borrowing more money can result in inquiries on your credit report. Lenders may worry you're taking on too many financial obligations if you start borrowing a lot of money.

Borrowing can also affect your debt-to-income ratio, which impacts eligibility for a home loan. You don't want to end up being denied the perfect mortgage or paying more for a loan just because you charged furniture or other goods or services in the months leading up to closing on your new home.

There's not just one type of mortgage loan. There are fixed-rate loans, which have the same interest rate and monthly payment for your whole payoff time. And there are also adjustable-rate loans, which lock in your starting rate only for a limited time (such as five years for a 5/1 ARM).

For most people, fixed-rate loans make the most sense -- especially now. But you'll need to consider what's right for you.

You'll also have a choice on your loan repayment timeline. The most popular options are 15-year, 20-year, and 30-year repayment terms.

When you choose a loan with a shorter repayment timeline, you'll have to pay more each month to meet your payoff deadline. But total interest costs will be lower. Sometimes it makes sense to pay more to be debt-free, but you need to consider the opportunity cost.

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As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

Putting at least 20% down on your home allows you to avoid paying private mortgage insurance (PMI), which protects the mortgage lender in case you default -- but which makes your monthly payments costlier.

A large down payment also makes you a less risky borrower, so mortgage lenders are more willing to give you a loan. While there are ways to get loans with as little as 3% down (or even nothing down), you'll have a more narrow range of options and will typically face higher costs with them.

ALSO READ: How to Buy a House With Zero Down Payment

Stretching to buy a home you can't afford could make it harder for you to get approved for a mortgage loan.

Lenders consider your mortgage payment when determining your debt-to-income ratio. If your payment pushes your monthly bills too high, you may have a harder time being approved for a loan.

Taking out a mortgage that's really costly can also compromise your other financial goals. To avoid this, aim to keep housing costs to around 30% of income or less.

If you'll be living in your new house with someone else, you'll have to decide if you want to apply for a joint mortgage. While it may seem logical to apply for a loan together, there could be some downsides if your partner has a lot of debt and very little income or has a low credit score.

If you jointly apply for a loan, you'll also both share responsibility for repayment for the life of the loan. Even if you separate and decide one of you will pay the bills, the mortgage lender will consider you both legally obligated to cover the monthly payments.

There are plenty of mortgage calculators online that will help you figure out how much your mortgage will cost at prevailing rates. Use them to see how much you can expect to pay depending how much you're going to borrow.

This can help you make all kinds of decisions, such as how large of a loan you can afford to take out or what loan term length is the right one for you.

There is a surprising amount of variation in loan rates and terms from one lender to another. You don't want to pay more than you need, so you should get multiple quotes. Try to get them from at least three different lenders -- and ideally from as many as you viably can.

By comparison shopping, you can pick a lender offering you the best possible deal.

Our credit card expert uses this card, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

When you initially shop around for a mortgage, you'll probably get pre-qualified. That's a quick, simple process that involves giving some basic financial information to see what rates you'll likely qualify for.

Pre-approval is different. With pre-approval, you submit documentation and get advance approval of your loan. You'll find out more details about the rate you'll qualify for and the lender will commit to loaning you the money you've been approved for -- as long as nothing changes before you formally apply for the loan.

Pre-qualification can help you compare rates and terms, but pre-approval will probably be necessary before you make an offer on a home as most sellers like to see proof you're eligible to borrow.

Lenders generally provide the opportunity to buy down your interest rate by paying points. These typically cost 1% of the amount you're borrowing and each point reduces your rate by 0.25%.

It can make sense to pay points if you'll be staying in your home long enough to make up for the up-front cost of them and benefit from the interest savings.

ALSO READ: Why It's a Better Time Than Ever to Buy Mortgage Points.

When you compare loans from different lenders, you need to make sure that you're comparing similar offers. If one lender requires points but the other doesn't, that could make a big difference in your costs. The fees lenders charge can also affect the cost of your mortgage as well.

Look at the fine print to ensure that all the details are the same so you can see which loan offer really is the right one.

When you apply for a home loan, lenders generally allow you to lock in at the rate you're offered -- sometimes for as long as 60 days. However, you may have to pay a fee to lock in.

Locking in can make sense if you're afraid rates will go up before you can actually complete the process of buying your home and taking out your loan. But if rates go down, you may be stuck with the higher rate you locked in -- unless there's a "float-down" provision that would allow your rate to fall.

You should understand the impact of locking in your loan and make the decision that's best for you.

ALSO READ: What Is a Mortgage Rate Lock and How Does It Work?

Finally, you should give yourself plenty of time to shop around for a mortgage, compare rates and terms, and decide which lender to go with. It can take several weeks for you to get approved for a loan, and you don't want to be rushing to do it because you're afraid the perfect house will slip away.

Our credit card expert uses this card, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

By taking these steps, you should be able to get a mortgage loan that's affordable and that offers you the best terms for your situation. When you have payments you're comfortable making and pay the lowest possible interest over time, you'll be very happy you made the effort to complete them.