If you’re a first-time homebuyer, you can end up becoming a nervous wreck going through all the steps of financing your home. However, financing your first-time home can be a simpler process than you think. To help get you started, follow our five steps below.
Review your Credit
When you take out a home loan, your credit scores will be a key factor in determining what amount you’re approved for and what your APR will be. This is why it’s so important to review your credit prior to seeking out a mortgage loan and dispute any errors that could cause your application to be declined.
Figure Out How Much You Can Afford
Before you start house hunting, you need to first figure out what you can afford. This mortgage calculator from realtor RE/MAX Realty One may be able to help you here.
Get a Buyer’s Agent
Don’t just call the listing agent i.e. the one on the sign out front. Instead you should have a exclusive “Buyer’s Agent” looking out for your best interests.
Research Your State and Other Local Assistance Programs
Besides federal programs, most states offer assistance-based programs for first-time homeowners with a variety of perks, such as low down payments, tax credits, and interest-free loans. However, your local county may have other homebuyer programs that you can take advantage of as well.
Save Up for Your Down Payment Early
It’s not uncommon to make a down payment of at least 20 percent, but most lenders only require around three percent down. However, by putting down the bare minimum, you’re prone to paying more for private mortgage insurance and harsher credit checks. You should work on saving for a down payment early by saving work bonuses and tax refunds, in addition to setting up an automatic savings plan.
Receive a Preapproval Letter
Getting prequalified for a mortgage will only give you an estimate of how much you can expect to receive from a lender based on your debt and income. A preapproval, however, will give you an exact amount and the loan terms as determined by the lender after a more detailed examination of your finances. Get a preapproval letter when you are close to making a deal on your new home. This can make you look like a serious contender and can give you an edge if there is any competition.
Every new homeowner has to find a way to finance their new property. However, with the help of this guide, hopefully, we could take the stigma out of having a hard time financing a new home. As long as you follow the steps above, you’ll be moving into your new place in no time.
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You make a good suggestion to put down more than the minimum down payment so that you can get easier credit checks and can pay less for mortgage insurance. My husband and I are expecting our second child, and we want to get a bigger place that feels more permanent than an apartment. We’ll have to find some real estate for sale and start saving for that down payment.