Shopping for your First Mortgage? Things to Know Before you Start
There’s nothing more terrifying than the thought of your very first mortgage, so while you might be excited about buying your first home there are lots of uncertainties that come with the financial side. Learning how a mortgage works for first time buyers will put you in the best position to find yourself the right deal and potentially save thousands over the life of your loan.
People often go into their mortgages without learning some of the secrets or tips for first time home buyers, not realizing all the hidden ways that you can benefit. We’ve rounded up seven great mortgage tips for first mortgage so you can come away with the best deal for you and end up in the home of your dreams.
Tip #1: Check Your Credit
There isn’t a lender around who won’t check your credit score when you apply for a home, so why not get one step ahead and do it before you make plans to meet with one. By understanding about your own credit score you get a clear picture of your financial situation and how attractive (or unattractive) you might look to a lender.
There are some places where you can get a free copy of your credit report, so make sure you’ve studied it before you even consider applying for a loan. If your score seems low, spend the next six months working on building it up to give yourself a better chance of securing a mortgage with lower interest rates.
Tip #2: Use A Home Affordability Calculator
There are plenty of financial institutions with access to home loan calculators that let you put in your personal information to come up with a result. These calculators can show you what you’re capable of borrowing and what repayments might look like all based on your income, debts, and other information.
These simple calculators can give you an idea of what you might be able to borrow before you even head to the bank, so you have a clear picture of what you’ll be asking for and will allow you to plan a budget for the future. They’ll also allow you to see how much of a difference the slightest change in interest rate can have which will motivate you to look for the best deal.
Tip #3: Look At Local And State Assistance Programs
Take your time to do some searches for assistance programs in place that might help you get your first home. In the United States, there are both federal and state assistance programs that can offer you benefits like tax credits, interest-free loans for set amounts, and loans with low down payments.
Use all of the possible programs available in your area to give yourself the best chance. There are also special rates and down payment options, if you do your research, so find the best one to suit your unique situation.
Tip #4: Put Money Aside For After You Move
While it’s very important to focus on the mortgage, getting your down payment, and making repayments, you should also remember to keep some money aside for after you move in. Homes comes with all kinds of costs and like removalists, closing costs with the bank, adjustments, and renovations, so keep money aside for these things. Any extra cash that you don’t use can be put on your mortgage to reduce your overall payments in the long run.
Tip #5: Start Looking At Homes Early
Before you start applying for mortgages you should get an understanding of what the housing market is like. Look in the areas that you might be interested in buying and see what kinds of homes are available in your price range. With some knowledge about what you’re looking to buy, you’re going to seem like a more responsible borrower and will also be in this best position to barter on the price when it comes time to buy your home.
Tip #6: Stay Under Your Preapproved Limit
Although you’ll be given a figure by banks and lenders about how much they’re willing to loan you, it’s never a good idea to reach this maximum amount when buying your home. In order to give yourself the best possible chance of making repayments and not having debt that is out of your control, stay well under this limit. Down the line, if you want to do renovations or repairs on your home, you’ll have more room to borrow as well.
Tip #7: Get A Preapproval Letter
When you’re ready to start house hunting seriously, you can speak with your lender about getting pre-approval. This process means they go through your finances and other information to determine how much they would be happy to lend you, and this information is placed in a formal letter.
When you’re looking at a house and ready to make a deal, having a pre-approval letter can show the agent that you’re serious about moving forward and have already been approved for finance.
Be Confident And Plan Ahead
The truth is, nobody can really prepare you for your first time buying a house, but knowing some of these tips can make the process a little easier. There is so much to consider when buying your first home, and your mortgage is certainly one of the most important parts so you need to be smart about it.
As a first home buyer, the best thing you can equip yourself with is knowledge as it will make you more confident in the buying process as well as in the future of your financial situation. Too many people get in over their head with their 1st home mortgage so be careful that you’re not one of them.