How Should First-Time Buyers Prepare To Get A Loan?
Obtaining a mortgage loan as a first-time buyer requires some work. Even if you feel very prepared, it's wise to take the following 5 steps before filing a loan application.
Credit Score Check
Lenders use your credit score to determine how likely you might be to pay. Many lenders consider a rating of around 680 to be the border between a fair and good credit score. If you have a lower score, you may need to pay a higher interest rate. If the score is extremely loan, lenders may reject your application. However, there are government programs from agencies like the FHA and HUD that may help you obtain a first-time home buyer loan.
Whenever someone applies for a mortgage, the lender will want to see lots of documentation. Start gathering tax documents, pay stubs, and personal documents as you think you might ask for a first-time home buyer mortgage loan. If you're unsure which documents are necessary, ask a real estate agent to provide some examples.
A down payment is a percentage of the purchase price. Suppose you are buying a $200,000 house and making a down payment of 20%. You will need to pay $40,000 at the start.
Saving more money for a bigger down payment is almost always better. A larger down payment can help you secure a lower interest rate and may make approval for a first-time home buyer mortgage loan easier. You should also keep some extra savings to cover closing costs, such as lender fees and legal expenses.
Getting pre-approved for a mortgage can make a big difference. Pre-approval means that a lender looked at your financial situation and provided an estimate of how much financing is available to you through their institution. A lender will want to see some basic information about your financial situation, especially your current income, before considering you for pre-approval for a first-time home buyer loan.
A pre-approval can help you identify houses that are priced within your budget. Sellers may also take it as a sign that you are serious and can finance the house.
Calculate the Total Cost of Ownership
Owning a home represents a major financial commitment. In addition to mortgage payments, you'll need to cover property taxes and homeowners insurance. If the house is part of a homeowners' association, you'll also have to pay HOA fees.
Similarly, you should budget for maintenance and repairs. Even something as simple as replacing the air filter in the HVAC system adds up over years.
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