Steps to Securing Your First Mortgage
If you are looking to buy a home for the first time, you likely aren’t paying for it outright with cash. This means that you will need to secure a mortgage from a bank or other lender. This can be a long, intimidating process, but it is nothing to be scared of, especially because it is vital if you finally want to own a home! If you are a first-time home buyer, here are some important tips to help you secure your first mortgage.
Know Your Budget
The most important thing to do is evaluate your savings, current income, and what you can expect to make in the near future. From here you can figure out how much you can afford to spend on a home every month. Keep in mind that you aren’t just paying a mortgage – you will also have utilities, taxes, and maintenance bills, so make sure to figure those into your budget. As a rule of thumb, your mortgage should never be more than 43% of your monthly income, but it is best to try to stay significantly below that number.
Check Your Credit
Most lenders will require you to have good to great credit in order to secure a mortgage. Make sure to check your credit report before applying for a mortgage, as failed bids can harm you in the future. If you see something that doesn’t seem right, you can ask to have it removed and make your case to the credit reporting companies. In some cases, you may need to spend time building up solid credit before applying for a home loan.
Choose a type of Mortgage
There are several different kinds of mortgages, and each type is made for different people. If you are a military veteran, for example, you may be eligible for a VA loan. As a first-time buyer, you can also receive a first-time homebuyer loan, which allows you to get started with a down payment as low as 3.5 percent. This is great for those who have a secure, well-paying job but don’t yet have the savings for a larger down payment.
The pre-approval process can help you when you finally go in for actual approval. Lenders will check your credit and verify your income to determine if you are financially capable of making the mortgage payment. This also helps to let you know what you can expect to pay and what types of homes are within your budget.
Choose Your Lender
Whether you are using a mortgage broker, a bank, or another lender, you will want to choose carefully. Make sure to talk to everyone involved so that you can get a good feeling for how they operate and whether or not you can trust them. You will be working with them often, so you want to pick somebody that is honest and clear about their goals. If you go solo, know that you’ll be putting in much of the legwork, while a broker will do that for you but will require a fee.