5 Tips for First-Time Home Buyers
Buying your first home is a big step in your life. Whether your reason is to build generational wealth or create an investment to sell when you retire, it’s a great decision. However, there are a few steps you need to take before you can kick back and enjoy your new home. This blog will go over five tips for first-time buyers to help prepare you for the journey that lies ahead.
1. Be Sure You’re Ready to Commit to A Loan
The most important tip first-time homebuyers can get is to be sure that they’re ready! Buying a home is a big decision, so you have to be fully dedicated to it! The average mortgage loan term is 15 – 30 years. While it doesn’t always mean having to stay in your home for that long, it’s still a significant commitment. Don’t be 50% sure or 70% sure—be 100% sure that you’re ready for homeownership before you take on a mortgage! A few questions you can ask yourself before making a decision include:
- • Am I ready to commit to this home and city for at least five years?
- • Do I have emergency funds that can cover at least three months of expenses?
- • Do I have a stable income?
If you answered no to any of these questions, you might want to hold off the plans for now. Keep on saving and doing research until you feel that you’re ready!
2. Check Your Mortgage Number
Now that you know that you’re mentally prepared for a home, you can get things going. However, it’s a smart idea to get insights on how financial institutions view you as a borrower first. Knowing your strengths and weaknesses can be to your advantage when looking for a broker or lender. Knowing how the financial world views you as a borrower can save you time and money! All you have to do is input your financial information into our Mortgage Number Calculator, and that’s it! You will receive a mortgage number specific to you. With green, you qualify. The higher your mortgage number, the stronger you are from the lender’s perspective. With gray, you’re close, and with red, your financial situation needs a little bit of work. If you look like you’re in good shape, you can continue with the home buying process with confidence!
3. Maintain Your Credit
The next step is to get a mortgage pre-approval! Now is not a good time to open a new line of credit. When you apply for mortgage pre-approval, lenders will pull out your credit report. They’ll do it again before you close on the house. If they find that you’ve taken on another loan or line of credit, it could risk your final approval.
Be sure to keep paying your bills on time. We recommend not attempting to influence your credit rating for better or worse with any risky spending. Lenders want to see that your spending habits are consistent and can be relied on for future payments
4. Understand Your Loan Options
Did you know that there are several types of mortgage loans? The type you select will determine the type of house you can buy, your down payment, and more! The most common types of loans include:
- • Conventional Loans – This is the most common type of home loan. You can buy a house with as little as 3% down.
- • FHA Loans – This loan allows people to buy a home with less strict financial and credit score requirements. People can get this loan with a 3.5% down payment with a credit score as low as 580.
- • USDA Loans – These loans are for people who want to buy a home in a qualified rural or suburban area. People can get a USDA loan with 0% down. Subject to household income restrictions.
- • VA Loans – VA loans are exclusively for veterans and members of the national guard and armed forces. These people can get a home with 0% down.
5. Don’t Forget Closing Costs
Don’t assume that your down payment is the only thing you need to save up for to close your mortgage loan. You will need to cover closing costs before you take control of your new home.
Closing costs are expenses that go to your lender for arranging certain loan services. Common closing costs you might see include:
- • Escrow fees
- • Attorney fees
- • Pest inspection fees
- • Appraisal fees
- • Title insurance fees
- • Discount points
You can see your exact closing costs on a document called the closing disclosure. You can generally expect to pay around 2% – 5% of your total loan costs.
Buying your first home can be overwhelming. That’s why you should go through the process with confidence with the help of Mortgage Number! With Mortgage Number, you can be confident that you’re well equipped by taking the next steps with a clear understanding of how you fit into today’s lending environment. It’s free and at your disposal! We hope these 5 tips for first-time buyers help prepare you for your home-buying journey! Again, if you want to understand your overall strength as a borrower, Mortgage Number is the first-ever platform of its kind that simplifies mortgage qualifications! Click here to check our calculator out!