As a first time home buyer, you are probably excited to pick out your new house! You may have created a list of what you want your home to include. How many bedrooms, how many bathrooms, your ideal location and more are probably included on your list. With a first home, you will also be obtaining your first mortgage. Many first time home buyers don’t put as much thought into their first mortgage as they do their first home. However, this is a huge financial commitment. Therefore, it should be considered seriously. Take the time to read the following important mortgage information for a first time home buyer.
It is worthwhile to get pre-approved before you start searching for your dream home. You will need to provide the following for the pre-approval process:
- Income Amount
- Information About Other Assets
- Proof of Employment
- Driver’s License
- Social Security Number
During the pre-approval process, you will be alerted to any issues with your credit report and credit score. For example, an error may be found on your credit report. By identifying issues early in the home buying process, you will have time to address the problem before you purchase your house.
Pre-approval will also give you a price range of houses to look at. This will prevent disappointment. If you just start looking at houses without knowing your price range, you may fall in love with something you can’t afford. In addition, it will narrow your search so it is manageable. Keep in mind that you don’t need to buy a house for the full amount you are pre-approved for. Think about your own personal situation and set a maximum based on that. If you plan to have kids or buy a car or take lots of expensive vacations, you may not want to buy a house for the full pre-approval amount.
Maximize Credit Score
In addition to clearing up any issues on your credit report, you will also want to take steps to maximize your credit score. Pay off as much credit as possible to lower your debt ratio. Be sure to pay all bills on time as late payments will reduce your credit score. Avoid making large purchases at this time. It may be desirable to start buying new furniture for your new home, but it is best to wait. Also, avoid co-signing any other loans. A higher credit score means you are a better borrower. This will affect the terms of the mortgage you obtain and could also decrease the amount of down payment required of you. You want to obtain the lowest interest rate possible which is easier to accomplish with an excellent credit score. Over the life of the mortgage a lower interest rate will save you thousands of dollars.
When you buy a new home, you will need to pay a down payment and the closing costs. The down payment is the amount of the mortgage that you will pay at the signing. A higher down payment means the loan will be lower and it may also allow you to avoid paying Mortgage Insurance. This saves you money in the long-term. Closing costs are the costs associated with the creation of the mortgage. They include things like the lawyer fees, title insurance, and more. Finally, you will want to save money for new items for your new home. First time home owners often find they need to buy yard tools, such as hoses and a lawn mower. They also purchase furniture, curtains, electronics and kitchen items.
Enjoy looking for your new home, but also take the time to make sure you take the right steps to prepare for your new mortgage! Contact us for more information about being a new home buyer!