Homeownership is and has always been attainable regardless of where you live, but not an easy journey. The most commonly used options for home buyers are mortgage brokers and lenders. But not all lenders are the same, and you want to be sure that you pick the best lender considering home ownership is a big decision.
Here are some tips for picking financing options if you are a first-time home buyer.
1. Get Your Credit in Shape
Nobody wakes up and thinks they want to buy a home that very day. It is usually a thought they harbor and prepare for years prior. When preparing to take a mortgage, your credit score is the first place you want to look at. Different lenders have different credit score requirements. While you could access a mortgage with a not-so-good credit score, your options will be limited, and you want to have as many options as possible. Some areas that can help improve your score include paying off credit card debts, paying your bills on time, and any other debts you could have.
2. Shop Around
The longest allowable mortgage repayment period is 25 years. But you don’t have to repay in 25 years; your mortgage repayment period can depend on several factors, such as the terms of the lender and what you can afford. But one thing is true. A mortgage is a long-term commitment. So, you want to make sure you get a deal that will work in your favor and, preferably, one that will result in savings in the long run. So, you will need to shop around for lenders while considering their rates and other terms and conditions. One of the areas you need to pay attention to is the lender’s experience. The best thing about involving an experienced mortgage lender is that they often have a large customer base and are thus able to offer the best terms.
3. Get a Mortgage Pre-Approval
When shopping around for the best rates, you should also consider getting a mortgage pre-approval from one or more lenders. A mortgage pre-approval is a document issued to a borrower by the lender stating the lenders’ satisfaction with the borrower’s credit score and how much they can afford to borrow. This document helps real estate agents establish the home owner’s seriousness in buying a home which can help save time after closing the deal. To get a mortgage pre-approval, you must apply to the lender. Also, the lender will need to verify your income information. So, they may ask for your social security numbers, outstanding debt obligations, salary, and employer information, among others.
4. Have a Budget
If you qualify for a mortgage, a lender will be willing to offer you the maximum loan you can afford. But you may not want that much. Also, the higher your loan is, the costlier its repayment will be. The best approach is to have a budget for the home you want to buy. When creating your budget, you want to consider your home needs, such as the family size and location. According to experts, the cost of housing should be below 30% of your income, so you may want to set a budget around that figure. Keeping your housing budget on the low side can give you access to other types of loans if you need to.
Homeownership is among the most money-intensive investments most people have to make. For first-time homeowners, it is easy to make the wrong moves that could result in paying more than they should. Luckily, the above tips can help you avoid those costly mistakes.