Are you thinking about getting your first home? Why, it’s such an exciting time! One thing that intimidates some is the whole process of getting a mortgage. But we don’t want you to feel so challenged by this. That’s why we’re going to share with you some of the most helpful tips we can. That way your mortgage and home offer you and your family great value each day!
1. Start by getting your paperwork in order. Now this is critical. Because most lenders will request the past 5 years of tax returns, your pay stubs and bank statements as well as income and investment information. If you have any debts, you will need to supply this information. They will also ask for a record of your rent payments. Be patient with yourself because even if you are a very organized person, it may take you about 2 weeks to get together all of these documents. You will be very wise to make several copies of everything. Do remember that you’ll need to give the lender a copy. You’ll also want an extra one for your records – in case anything gets misplaced. You may be speaking with several lenders at the same time to see who can offer you the best mortgage rate, so you’ll need copies of the records for each of them.
2. Don’t be enticed by a lower down payment, it will cost you in the long run. This is something to pay attention to. Most lenders ask for about 20% as a down payment, but sometimes you can put down about 10% on a property. Don’t take the bait, because with interest on your mortgage, you are truly paying for this. While it may take you a little more time to come up with that 20% upfront, you will pay so much more putting down the 10% that it truly is worth it to do so.
3. Intimidated by the credit score check? Keep in mind the typical American has a credit score of about 700. People with lower credit scores get mortgages too. So take a deep breath and get your credit score. At the same time you’ll also get your credit report, so you can see who is reporting information to them. If there are any unpaid bills on this report, contact the companies and make plans to pay them as soon as you can. Because this will raise your score.
4. You might find it intimidating or reassuring – but lenders are all different. Remember that mortgage lenders are all in competition with each other. So they will offer different rates, to entice individuals and families to sign up with them vs. a competitor company. Some companies are more welcoming to someone who is a new homeowner. Some are also more welcoming to someone with student loan debt or bad credit. So if one lender turns you down or says “you won’t get a mortgage” realize that they are not speaking for every single company out there.
5. Find out how much homes in the same town or city and that neighborhood tend to sell for. This is a very important step in getting a mortgage. It’s become a bit easier now, with free websites where you can easily see how much homes are worth and what they have sold for. If the home you are looking at getting a mortgage for is $200,000 higher in cost than the other homes in a 3 block radius, then what makes this home special? Does it have more floors or a pool?
6. Look at your credit rating before you apply for a mortgage. Don’t neglect this important step. We recommend you do this, the very instant you are starting to think about buying a home. You can learn your credit score and also check your credit report for any errors and inaccuracies. Because if there are any errors, it will take time for them to be fixed and reported to the credit agencies to raise your credit score.
7. Don’t forget about the closing costs. Most often this is about 5% of your home’s value. For a new homeowner, this can come as a nasty surprise. But you’ve got to keep in mind that these costs exist. Typically they are about 5% but sometimes they can be higher. Ask your real estate agent what is most common in the area that you are looking for a home.
8. Crunch the numbers and figure out what your monthly costs living in your new home would be – before you move in. This is one of the most common mistakes new homeowners make. They pour all of their money into buying the home and then it turns out that they can’t afford the regular monthly expenses of living in the area. It is important that you sit down and actually crunch the numbers.
9. Speak to a real estate agent you trust, to ask what the market in that area is like over time. We highly recommend any new homeowner do this. Actually, you want to speak to a real estate agent who is not trying to sell you the home you are looking at. Take a real estate agent to lunch and ask their opinion about the market for the specific city or town and also the county you are looking at. You can also look online at newspapers over the past several years, to see what homes typically have sold for.
10. Think long term when obtaining a mortgage. For most of us, a home is our biggest asset. So before you sign on the dotted line, think long term. Is this where you see your family living 5 to 10 years from now? A lot of us will be in the same home for that period of time or perhaps longer. You want to get a mortgage for a home your family can feel “at home” in.
