Buying your first home is very exciting! However, being unprepared can quickly turn your excitement into discouragement or confusion. Fortunately, there are things you can do to help the home buying process go smoothly while keeping your excitement level high! Here are 5 mortgage tips first time home buyers should follow.
Check Your Credit Score & Make Any Corrections That Are Needed
If you are even so much as thinking about buying a home in the next few years, check your credit score and begin working to improve it. Dispute any incorrect information, bring your balances down and work to settle discharged debts. The amount of money you will be lent for a mortgage and the interest rate you are charged are influenced by your score. Having a great score can possibly save you thousands of dollars over the course of your loan.
Get an Estimate of What Your Down Payment & Closing Costs Will Be
As you begin to get more serious about buying a home, you will want to take the time to find out how much of a down payment you will need and how much you can expect closing costs to be. Depending on the type of mortgage you get, you may need anywhere from 3 to 20 percent of the home's value as a down payment. This can take time to save for, so make sure you know what it will cost to get you into the price range of a home you desire. Additionally, there are programs available for those who do not have the full 20% down payment, such as Private Mortgage Insurance (PMI).
Find the Right Mortgage Lender
Once you have improved your credit score and saved up your money, you are ready to begin the process of buying a home. While most people place a heavy emphasis on finding the right realtor, you should be concerned with finding the right mortgage lender. There is a lot of competition amongst financial institutions for mortgages. The right lender will provide you with information to make an informed decision. Take your time to meet with different lenders and ask about their process and what education they provide to first time homebuyers. A great mortgage lender can get you the right home loan product while also guiding you through the home buying process.
After selecting the right mortgage lender, you will want to get pre-approved. This lets you know how much the bank is willing to lend you and at what rate. It also shows potential sellers that you are ready to go and serious about buying a home. The last thing you would want is to search for a home, only to find out you can't get approved for the amount of mortgage you wanted, or not get approved quickly enough to purchase your dream home.
Learn What Documents and Financial Details You Need to Apply
The last mortgage tip you will want to know as a first time home buyer is what documents and financial details you will need to supply when applying to get pre-approved or approved for a mortgage. Nothing is more frustrating than showing up to meet with the lender only to realize you don't have the right paperwork. The exact papers you need may vary from lender to lender, but most will need at least six months of pay stubs, or two years of past tax returns if you are self-employed. They may also need bank statements, proof of identity, and of course they will have to pull your credit report.
There is a lot of information out there for first time home buyers and you may find yourself quickly becoming overwhelmed. However, if you allow yourself enough time to thoroughly research and read up on information, you will quickly become an expert. Following advice and mortgage tips will help guide you on a smooth path to homeownership. If you’re looking for first time home buyer information to start the process, download our educational eBook now!