Who this is for
- A credit score of about 620 or higher, though some lenders want more.
- A down payment that can start at 3% for first-time buyers, or reach 20% or more for other buyers.
- Steady income you can prove with paperwork, plus a debt-to-income ratio, the share of monthly income that goes to debt, that usually stays under 45%.
How it works, step by step
- Get pre-approved first, since a lender checks your finances and tells you how much you can borrow, which sets your budget and makes sellers take your offer seriously.
- Shop at least three lenders, because the same borrower can get different prices from different lenders on the same day.
- Compare Loan Estimates side by side, looking at the rate, the APR, any points, and lender fees.
- Lock your rate once you are under contract, usually for 30 to 45 days.
Pros
- Lowest long-run cost if you have strong credit, since pricing rewards higher scores.
- PMI drops off once you reach 20% equity, which lowers your payment automatically.
- Fewer rules about the type of property you can buy, compared with government-backed loans.
Cons
- Pricing punishes lower credit scores harder than FHA loans do, so weak credit costs more here.
- Under 20% down means you pay mortgage insurance until your equity reaches that mark.
- Lenders ask for more paperwork than some alternative loan types require.