Credit

• Your credit score determines whether you will qualify for a mortgage, and it also determines the interest rate you will pay on your loan. Before shopping for a mortgage loan, review your credit reports for mistakes and find out your credit score. Bankrate.com explains that banks typically prefer credit scores above 640 and that banks offer the best interest rates to people with credit scores above 750. To improve your credit score, avoid applying for new credit cards, pay all bills on time and keep the balances on your credit cards lower than 30 percent of the available credit.
  
  

Budgeting

• Bankrate.com advises that the Federal Housing Administration requires that your mortgage payment be no more than 31 percent of your gross monthly income and that conventional loans require your mortgage payment be no more than 28 percent of your monthly income. To get an idea of what you can afford based on your current financial situation, use Bankrate's new home calculator (see Resources).
  
  

Paperwork

• Acquiring a mortgage loan requires a substantial amount of paperwork. In order to streamline the paperwork process, compile financial documents in a special file or folder. You need W-2s for the past year, most recent paycheck stubs, bank statements for the past year and a list of other outstanding debts. Have this information ready to supply to lenders as requested.
  
  

Finding a Lender

• The Federal Reserve Board recommends that you consult with several lenders, including brokers, banks and credit unions. Compare interest rates, loan terms and fees offered to determine the best deal. Once you choose a lender, further negotiate terms if possible. Use the Mortgage Shopping Worksheet (see Resources) provided by the Federal Reserve Board to record and compare information from different lenders.