First-Time Buyer Mortgage Checklist
Applying for your first mortgage is nerve-wracking. With all the different factors to consider, it’s easy for first-time homebuyers to get overwhelmed. Buying your first home is a massive step in your life, and living in a home that you own can feel very liberating.
To help you first-time homebuyers looking to apply for a mortgage, we’ve created a checklist of things to do when applying for a mortgage to make the process much easier for you. So, if you’re a first-time homebuyer, you’ve come to the right place.
Set a Budget
The first thing we recommend doing when applying for a mortgage is setting a budget.
Based on your savings, income prospects, and your regular salary, it will be easy to gauge the type of downpayment and monthly fees you can afford. Remember, mortgages are paid over many years, so it’s always important to think of long-term costs.
By setting a budget before hitting the market, it will be much easier for you to narrow down options.
Having a set budget also allows you to search for homes that really fit your budget and needs.
Improve Your Credit Score & DTI
Two important factors lenders consider when it comes to mortgages are the borrower’s credit score and debt-to-income ratio.
What is a credit score?
Your credit score depends on many factors such as new credit applications, existing credit, and how consistently you pay monthly dues, just to name a few. A low credit score makes it harder to secure desirable interest rates, so we highly recommend applying for a mortgage with a high credit score by not applying for new credit cards, making substantial debt payments, and paying your bills consistently and on time.
What is a DTI?
Your personal DTI ratio factors in your overall monthly debt compared to your monthly salary. Lenders base your capability of making regular payments on your mortgage on your DTI, so it’s best to get that in order before checking out mortgage options.
Consider Your Lending Options & Get Pre-Approved
Different lenders offer a variety of mortgage options. And understanding the variety in the market is very important in finding the right mortgage for you. A mortgage broker can help you shop the market.
Once you’ve found the right lender for your mortgage, you have to get pre-approved for a loan. Borrowers need to meet certain requirements. It will also help greatly if your DTI and credit score are all in order to help secure lower interest rates.
Start the Hunt With a Qualified Real Estate Agent
After getting pre-approved, it’s time for the fun part: looking for a home.
To help you on your hunt, we recommend finding a competent real estate agent in your area. A real estate agent understands the market and can provide you with useful input that you can use when deciding on a house.
Before you start looking at options with your real estate agent, we recommend writing down important questions you would want to ask about the house and market situation.
Keep Interest Rates and Closing Fees Into Account
Remember, the downpayment and monthly fees aren’t the only things to consider. There are many fees associated with buying a house, and many first-time buyers get surprised by all the additional fees included.
When buying a house through a mortgage, there will always be an interest rate. Depending on your DTI and credit score, the interest rates vary, but always expect to pay more money when buying a house through a loan. On top of that, there are also certain fees you need to handle when closing a sale. If you keep these fees in mind when buying your first home, it will be much easier for you to estimate the actual cost at hand.
Mortgages can be scary and intimidating. However, if you make sure to start saving early and get your finances in order before applying, you’ll find that scoring a mortgage with desirable interest rates is much easier than you think! And once you get pre-approved for your mortgage, you can finally start searching for a dream house that will be your home for many years to come!
