4 Steps to Easily Secure a Mortgage as a First-Time Home Buyer. While thirty years ago, it didn’t take much to get a mortgage; homebuyers nowadays can struggle a bit with getting one. It’s not their fault; it’s just that the housing market is always changing, and with that housing market crash and recession that hit in 2007, that also made a pretty massive impact. But with that said, it’s not impossible for a first-time home buyer to get a mortgage. Tough, yes, but it doesn’t need to be impossible. It’s not only about choosing the right mortgage for your first home, but it’s about qualifying for one and taking the needed steps to secure a mortgage. So, what do you need to do in order to qualify? Well, keep reading on to find out more!
Take a Good Hard Look at Your Financial Situation
If you’re in a hard place, then mortgage loan bankers aren’t going to want to do much for you. Before starting your mortgage journey, assess your financial situation thoroughly. Calculate your monthly income, expenses, and existing debts. Understanding your financial health will give you a clear picture of how much you can afford to borrow and comfortably repay. If you’re in a tough situation and you’re barely able to get by, then are you sure you’ll be able to pay your mortgage?
While, yes, monthly rent is honestly more expensive than the average mortgage, there are other costs you’ll need to think of, like the downpayment, paying for real estate agents, moving, and so on. All of this is going to add up.
Save for a Down Payment
One of the most critical factors in securing a mortgage is having a down payment. While the amount required may vary depending on the lender and loan type, aim to save at least 3-5% of the home’s purchase price. The larger the down payment you can provide, the more favorable your mortgage terms may be. They can be a lot, sometimes tens if not hundreds of thousands, for a home. It’s not ideal, but this is going to be asked of you; almost always, a homebuyer will have to have money for a downpayment; there isn’t any other way around it. If you don’t have money in your savings yet, then you best begin looking into it.
Look at Your Credit Score
Your credit score plays a crucial role in determining your eligibility and interest rates for a mortgage. Obtain a free copy of your credit report and check for any errors or discrepancies. If needed, take steps to improve your credit score by paying bills on time and reducing outstanding debts. If your credit score is too low, then it might be next to impossible to get a mortgage, or the interest rates might be high. If you’re in debt, such as credit card debt, try to look into paying this off first before getting a mortgage. Focusing on the credit score is going to help you out a lot.
Try to Get Pre-Approved
You can get pre-approved for a mortgage, and this will save you a lot of headaches. Obtaining a mortgage pre-approval can give you a competitive edge in the housing market. Approach lenders to get pre-approved, which involves a comprehensive review of your financials. Having a pre-approval letter in hand demonstrates to sellers that you’re a serious and qualified buyer.