Getting a mortgage and buying a house for the first time is a big undertaking that requires a lot f planning and preparation. In order to buy the home, you will need to be approved for a mortgage. In order to get the best mortgage, you will need to truly master your finances and credit.
Here are some important tips for first time mortgage applicants
- Assess your financial status – Take stock of all your income, savings, current debts, and all of your expenses. This is the first step to figuring out what you can afford. You will also want to calculate what new expenses you’ll have as a homeowner, such as home repairs and furnishings.
- Talk to a mortgage officer early – It is a good idea to start working on your mortgage prospects before you actually begin to look at properties. A mortgage officer will have the experience to provide several tips including credit problems you may not have considered. They can also help you improve your status.
- Build up savings – Buying a home is expensive, so you will want to have some savings on hand. One of the biggest and most important expenses is your down payment. Having a large down payment can be a challenge at first, but it usually means that you can have a smaller interest rate for your mortgage later on. This can save you money in the long run.
- Be aware of hidden costs – Not only do you have to save for the down payment and monthly payments, but there are other expenses associated with buying a home. For example, home inspections, surveys, taxes, and insurance.
- Build good credit – Get into the habit of paying your bills regularly and always on time. The better your credit score, the better your chances of being approved for a good mortgage.
- Pay off debt – Lenders will look at the ratio of debt to income that you have when they are assessing you for a mortgage. If you already have too much outstanding debt in relation to your income, they may not want to lend to you. Thus, pay off as much of your pre-existing debt as you can.
- Find ways to motivate yourself – Building your savings can be a challenge when you have to leave a portion of your income off-limits for the time being, so it is important to stay motivated. Automatic transfers can make this easier. Also, you can give your savings account a name that keeps you motivated like, “my new home.”
- Keep and organize all your documents – You will need to show all kinds of documents like your proof of income, bank statements, and tax documents when getting your mortgage. Ensure you have access to the information when you apply for your mortgage.
- Shop around – Not all lenders will be able to offer you the same terms. Therefore, it is smart to talk to a mortgage broker that will assess all available options from a variety of potential lenders.
- When your loan is still pending, just wait – Applying for any new credit or making any credit card purchases can interfere or derail this process.