First-Time Buyer? What To Know About Financing
Unless you've just won the lottery or inherited money, you will likely need to obtain financing for your home. First-time buyers often wonder where they should begin their quest to be approved for a mortgage loan. For what first-time buyers need to know about financing their dream home, read below.
Improve Your Personal Finances
It can take time to get your finances shaped up enough to qualify for a mortgage. For example, it can take months for the changes you make to pay down some of your credit cards off to be reflected on your credit report. Begin to work on your credit several months before you apply for a pre-approval so that you can afford a nicer home.
Look over your credit report and contact them if you find errors. Pay down debts, if possible, and don't be late on paying any bills. Also, put off taking out any new credit cards or loans until you close on the home. Finally, don't change jobs if you can avoid it until later.
Save for a Down Payment
Just like your credit score, having a generous down payment can not only improve your approval chances but also can allow you to afford a more expensive home. While many loan programs don't require a down payment, the more you can apply to offset the loan, the lower your monthly payment will be. Banks are more likely to approve those with a healthy down payment because it produces instance equity in the home.
Programs That Target First-Timers
Ask the lender about programs that help first-timers own a home. Some of these programs include having the buyer go through some educational programs to prepare them for getting approved and budgeting afterward. There are programs for almost every type of buyer, from women and veterans to those wanting to live in a rural area. These programs also target those with lower credit scores and income that might have a challenge being approved for a conventional loan. A first-time homebuyer loan program can be great for those who don't know where to start.
Know Where You Stand
Looking for a home without knowing how much you can afford is a waste of time. Once your personal financial situation is at its best, talk to a lender about being pre-approved for a mortgage. This process is like applying for a mortgage and involves some of the same paperwork. However, with a pre-approval, you will have a letter to show sellers that indicate you are likely to be approved for a mortgage within a certain price range.
Speak to a lender to learn more.