5 Things First-Time
Homebuyers Must Know Before Taking out a Mortgage
By: Greg McKinney Mineola TX
If you’re thinking about buying your first home, there are
some things you should know to increase your chance of mortgage approval. Even
in today’s competitive real estate market, first-time homebuyers have many
opportunities to get a home, but it all starts with knowing how to get approved
for a mortgage.
You Must Check your
Your credit is the first thing lenders look at and use to
decide if you’ll qualify for financing. Everyone gets free access to their credit reports
– use it.
Check your credit report for any of the following:
- Late payments
- Use of more than 30% of your credit line
- Inaccurate information
Dispute any incorrect information, bring late payments
current, and pay any large outstanding credit lines down to improve your credit
You Need Money for a Down
Payment AND Closing Costs
You might only need 3 – 3.5% down on the home, but don’t
forget about closing costs. They can be as much as 2% - 5% of the loan amount.
You must prove any funds you use to cover the down payment
and closing costs belong to you and they aren’t borrowed. The earlier you save,
the easier it is to afford a mortgage.
Acceptable funds can come from your checking or savings
account, investment accounts, and even your 401K or IRA if allowed by your
Get Pre-Approved for
Looking at Homes
A loan pre-approval tells you how much you can afford and at
what terms. It also tells sellers you are a serious and capable buyer, which in
today’s real estate industry is important. Sellers often won’t take offers from
buyers without a pre-approval.
Think of the pre-approval as your first step to buying a
home. You’ll knock out the requirements to qualify you personally for the loan.
All that’s left is to qualify the property and take care of any loose ends the
lender lists as conditions on your pre-approval letter.
Know How Much you can
A pre-approval will tell you the maximum amount of loan a
lender will give you. That doesn’t mean you must spend the full amount.
Look at the payment and decide if it’s something you can
afford. Not everyone borrows the full amount they qualify for because it
doesn’t fit within the budget they set for themselves. Don’t forget you’ll need
plenty of reserves as a homeowner since all maintenance and repairs are your
Compare your Loan Options
You might qualify for more than one type of loan. Take
advantage of the opportunity to compare them side-by-side. For each loan you
apply for, you’ll receive a Loan Estimate. Use this document to compare your
options from each lender. Look not only at the monthly payment and closing
costs, but at the big picture.
How much does the loan cost over its entire term? That’s how
you choose the best loan.
Buying your first home is exciting but proceed with caution.
Check your credit, save enough money to cover your costs, and know your loan
options. With the right steps, you can enter homeownership with an attractive
loan and still have money in your pocket.
Greg McKinney Mineola Texas
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