10 Mortgage Tips for First-Time Home Buyers

So you’re thinking of buying a home. Congratulations! Now comes the fun part: finding a mortgage. If you’re a first-time homebuyer, the idea of getting a mortgage can feel overwhelming. Thankfully, there are a few tips we have for you to make this process easier and more efficient.

Determine What You Actually Need

When it comes to buying a house and getting a mortgage, you have to think of your actions as an investment. After all, this will be the home you’ll (most likely) live in for the next several years. As such, you should determine what kind of house will meet your needs both now and in the future. For example, are you and your spouse thinking of expanding your family in the next few years? If so, you should avoid listings that only have one bedroom. Likewise, if you are thinking of starting a family, you should consider neighborhoods in good school districts.

Similarly, what do you want your commute to work to look like? Do you want to be close to family? Would a condo or a single-family home better suit your needs? Answering these questions can help you determine what kind of home is right for you so you know where to start looking.

Figure Out What You Can Afford

Once you determine what kind of home and location fits your needs, you need to figure out what you can genuinely afford. After spending time on Zillow, it can be easy to fall in love with houses that are outside of your budget. However, one way you can avoid this is by using a mortgage calculator.

With a mortgage calculator, all you need to do is enter the total cost of your home, duration of the amortization period, whether you’ll be making weekly, bi-weekly, or monthly payments, interest rate, and your down payment amount to determine the true value of your home and what you’ll be able to afford.

Having a budget not only guarantees you’ll be able to afford your home and lifestyle moving forward, but can help prevent you from falling in love with a home that is outside the realm of possibility.

Pro tip: Make sure to factor in additional expenses such as homeowners association fees, home repairs, maintenance, and utilities to create as realistic a budget as possible.

Work on Your Credit

While a bad credit score won’t prevent you from getting a mortgage, it can prevent you from getting a good interest rate. Depending on your credit score, different options may be available to you. The better your credit score is, the more opportunities will be awarded to you. For example, homebuyers with a high credit score can save thousands of dollars throughout their mortgage.

To increase your credit score, continue to make on-time payments. If possible, try to pay off your lowest debt first. Even a jump of 20 points can get you a better interest rate.

Understand the Different Types of Mortgages You May Qualify For

There are five main types of mortgage loans available to first-time homebuyers – and it’s important to understand each one so you know which one applies to you the best. For example, conventional loans are best for homebuyers who have a good credit score. These can either be conforming or non-conforming loans, which may have to conform to standards put in place by the Federal Housing Finance Agency (FHFA).

Homebuyers who have a credit score of 700 or higher and are looking to purchase an expensive home may qualify for a jumbo loan, whereas those who are active duty or military may qualify for a USDA, FHA, or VA loan. Knowing the difference can prepare you for when you meet with your mortgage lender, which brings us to our next point…

Research Mortgage Lenders & Shop Around

When it comes to getting a mortgage, you should never go with the first lender you meet. This is because different lenders may be able to offer different rates. Furthermore, your experience with the lender’s responsiveness and customer service will be different everywhere you go. If you meet with a lender and you don’t feel comfortable with them at that initial meeting, remember that it’s okay to look elsewhere.

Get Pre-Approved

Before making an offer, it’s always a good idea to get pre-approved first. First, this shows the seller that you’re serious about purchasing their home, but it also serves as evidence that you can genuinely afford the home. This will come in handy if there are multiple parties interested in one property.

Remember That You Don’t Have to Pay the Asking Price

While you can pay the seller’s asking price, it’s important to know that you don’t have to. Your realtor can help you negotiate with the seller. In fact, your realtor may be able to have the seller cover the cost of closing fees or other things, like necessary repairs.

It’s understandable that you might be afraid to negotiate for fear of missing out on your dream house, but negotiating is a normal part of the homebuying process. Don’t be afraid to ask.

Look Into First-Time Homebuyer Programs

If you’re buying a home for the first time, there may be programs you qualify for that can help you. For example, if you’re a teacher or in law enforcement, you may qualify for The Good Neighbor Next Door program, which can entitle you to receive 50 percent off a home purchased in a “revitalization area” if you reside there for at least three years. Homebuyers who need help with closing costs may be eligible for Fannie Mae’s HomePath ReadyBuyer program, which can cover up to 3% of closing costs.

Ask your realtor or mortgage lender about available options to learn more. If there’s a way you can keep money in your wallet, then do it!

Save Money

Having a nest egg when buying a home is paramount, as many first-time homebuyers forget to account for the various expenses that come with buying a home. However, one of the biggest benefits of saving money ahead of time is that you have enough for a down payment. While there are programs out there to assist you with down payments, being able to pay even as little as 3% can go a long way.

Gather Your Paperwork

Finally, you need to gather all your important documents. Throughout this experience, you will have to show proof of previous rental payments, outstanding loans, bank statements, income taxes, and pay stubs, so it’s best to get started on all of this before you start the homebuying process.

It’ll just be one less thing on your plate. And when it comes to buying a house for the first time, the more you can streamline the process, the better experience you’ll have.

Ready to Buy a Home? Get a Mortgage Through M&M Mortgage

When you’re ready to find a home, our dedicated team is ready to help. We have years of experience working with first-time homebuyers and we’ll work with you to make this process as easy for you as possible. Call us today at (651) 639-9800 or apply online today.