Purchasing a home is one of the most significant milestones of anyone’s life. This is a legal agreement where a lender provides you with the money to buy real estate, and in exchange, you agree to repay the loan with interest.

Typical mortgages last in 5-year increments, with the most popular being 15 and 30 year periods. The collateral for the loan is the property itself.

If you fail to repay your loan, the lender has the option of repossessing the home through a legal process called foreclosure and then selling it to another buyer to recoup their costs.

Securing a reasonable mortgage rate does require a bit of homework. You’re going to want proof of your income, an average or higher credit score, and a low debt to income ratio in order to attract the best terms.

When you are prequalified, you will be given an amount that lenders will be willing to lend. This will help you determine the kind of property you can afford. You may also wish to consider:

1 – Credit Score There are loan programs available to buyers with a low credit score of 500-600, but to really capitalize on the deal, you’ll need a score of 620 or higher. Working with a credit repair agency is a great way to increase your score.

2 – Home Value Getting prequalified is an excellent way to ensure you’re not getting over your head financially. You may love the look of that 5 bedroom 2 bath colonial, but you need to stay more to a 3 bedroom 1 bath ranch for the time being. This isn’t a bad thing. Once you have your finances a bit more secure, you can always upgrade.

3 – Down Payment Various mortgage programs function with little to no down payment. For most buyers, having 3-20% of the home’s value as a down payment can increase your chances at excellent terms. Otherwise, you may want to consider options like VA loans and FHA opportunities.