There are many different factors that go into a mortgage. When purchasing a house, everyone should be aware of their financial situation before approaching a lender. By taking control of personal finances there will be few surprises once the loan is processing. The most important part of a home loan is understanding personal finance needs, the best type of mortgage for the situation, and how much will be put down as a down payment.

Personal Finances

Having a well thought out budget can greatly help someone when they are looking to purchase a house. Creating a budget before making the leap can help determine if it is a smart financial decision or if it is not the time to buy. This is going to be a large purchase that will take anywhere from fifteen to thirty years to pay off. A little planning will go a long way.


Having a good credit score can really help in the process of purchasing a house. The better the credit score, the better the rate can be. Many lenders prefer to give mortgages to people that have credit scores that are at least above 660. The best rates will be reserved for scores about 740.

Even if a person has bad credit, that does not mean they can never get a mortgage. There are some lenders that will work with someone with poor credit. whether it is to help them gain better credit or allowing them to have a mortgage with higher rates.


When looking at what mortgage is the best, it really depends on the situation. Many people feel safer with a fixed-rate mortgage. A fixed-rate mortgage will have an interest rate that does not change throughout the time a borrower is paying on the mortgage. This locks in a rate at the beginning of the loan, whether it is a good or a bad rate.  

The interest is divided into small monthly payments throughout the life of the loan. While having a fixed rate can save a borrower from an interest rate increase, it will mean that they will pay more interest overall. It is better to have a shorter loan if using a fixed-rate mortgage.  

An adjustable-rate mortgage uses a fixed interest rate for the first portion of the loan. Once this time period has passed, the interest rate is able to adjust. This means there can be changes in the monthly payment if the interest rate increases.

Choosing a Price Range

When looking at the price range of houses, it is always tempting to go higher. Typically a higher price tag comes with a larger house and more amenities. The key to choosing a good price range is to look at what monthly payments can be afforded. Determine where that puts the top of the price range and avoid looking at any houses that go past that point.

Down Payment

It is always great to put a large down payment on a house. The larger the down payment, the smaller the mortgage will be. That means smaller monthly payments, or a mortgage that only takes fifteen years to pay off instead of thirty.  

By putting twenty percent down, there will be no private mortgage insurance applied to the loan. If the loan is for more than eighty percent of the price of the home, private mortgage insurance is needed. When putting more down, it can lower mortgage payments, avoid private mortgage insurance, and lower interest rates.

Buying a home should be planned and prepared for. By making a strategic plan for what the budget can handle, what payments will be, and how large of a down payment will be used, a potential homeowner can save themselves a lot of stress. Before meeting with a lender, every borrower should learn about their financial situation and make sure their credit is on the rise.