The Definitive List of Tips for First-Time Homebuyers
Ready to become a homeowner? Here are some Things you should know.
Buying your first home is a big deal. We also know that you probably prefer to do online research before you decide to speak to someone personally. We would do the same. At Locke Your Loan we want the Home buying process to be stress-free and rewarding .
Get pre-approved, not just pre-qualified.
You’re not fully ready to start looking at homes until you understand the difference between pre-qualification and pre-approval.
Pre-qualification determines your ability to repay a loan based on the information you provide.
Pre-approval is a written commitment from a lender to extend a mortgage to you for a specific amount and time period. This involves an analysis of your financial status and credit history.
With a pre-approval, you’ll be able to set your budget, negotiate confidently and close faster. Realtors and sellers will often take your offer more seriously if you get pre-approved prior to house shopping. It lets them know you are ready to make a deal! Call Locke Your Loan to discuss getting pre-approved today.
Clean up your credit.
Your credit score is not the only factor in getting approved for a mortgage, but it is an important part of determining what you will be able to qualify for. Here’s how to make sure your score is on point:
Know your credit score before meeting with a lender. It is important to know where you stand before applying for a loan. There are multiple sites that will let you check it for free.
Verify that your credit report is accurate. Identify any errors and dispute them with the credit bureau as soon as possible. Any unresolved disputes may lower your credit score and delay your loan approval.
Pay down high credit balances. Chipping away at those bills may positively affect your credit score and help you get approved with a better interest rate.
Set up payment plans on any delinquent credit lines. Call your creditors and work out a budget-friendly plan that is fair for you.
Become familiar with mortgage terminology.
Understanding the terms that are unique to the mortgage process prior to meeting with Locke You Loan can make everything easier to understand. Explore our Glossary of “SCARY” words to become more familiar with loan and mortgage terms.
Establish your budget.
When you’re trying to figure out how much house you can afford, start with your income. Then be sure to include all of your expenses, including:
Monthly bills (utilities, loans, etc.)
Your costs of living (food, entertainment, etc.)
Estimated property taxes
Estimated homeowner’s insurance
Estimated private mortgage insurance
Potential Homeowners Association fees
In addition to these recurring costs, remember to factor in one-time costs during the buying process, including closing costs and your down payment. Need help? Call Locke Your Loan
Calculate your debt-to-income ratio (DTI).
Traditionally, lenders will not qualify you for a mortgage unless your DTI is less than 40%. You can change your debt-to-income ratio by either increasing your monthly income or decreasing the amount of debt you carry each month. The second option is usually easier than the first, so pay down as many open credit accounts as you can.
Location is everything.
When choosing a home, include neighborhood safety, public school ratings, your daily commute and local amenities in your decision. If parks, libraries, pools, sports arenas, churches, restaurants or shopping centers are important to you, make sure you consider their proximity to your neighborhood. Your agent should be able to get all of this information for you.
Don’t make financial changes during the loan process.
All aspects of your income and finances are on the table when applying for a loan. Don’t make any major purchases like a car, large appliances or furniture, and don’t move untraceable money into or around your accounts. Also avoid changing employers during the home loan process. Steady employment will likely be a factor in determining what loan you qualify for.
Get a home inspection.
Inspections are important, and in some cases required, to help you fully understand the condition of a home. They can also be helpful for negotiations to help drive prices down or have additional services stipulated in the contract.
Get all details in writing.
During the purchase process, a seller may make a variety of verbal guarantees. If a seller says they will a broken sink, make sure this information is included in writing in any agreements you sign. If an agreement is not explicitly written in a contract, the seller is not obligated to abide by it. This also includes all of the details of your loan. Make sure the amount, payments, rate lock, and other details are clearly stated in writing in a signed document.
Geez, that was a lot of info!
It sure is! Like we said at the beginning, buying your first home is a big deal. If you have questions about anything you’ve read, or if you’re ready to begin the mortgage process, we’re here to help!
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