Anyone attempting to get a mortgage may feel like they are in a corn maze with no way to get out. While the labyrinth may be fun, it might also feel like there is no end. Don’t worry. With patience and help from those who have taken this path before, a person can start at the beginning and make their way easily through the web so they have a home they can call their own. The following guide will help a first-time buyer easily navigate the mortgage maze.
Set a Budget
Most homebuyers need a mortgage. Before applying for one, they must determine how much they can afford. They must consider the mortgage payment, real estate taxes, insurance, utilities, repairs, and maintenance. Buyers should take care not to overborrow. It’s easy to get caught up in the process and let emotions take over, but then the buyer finds they are in over their heads. Having a budget in place reduces the risk of this happening.
Down Payment
Lenders typically require homebuyers to have a down payment. This amount ranges from three percent of the home purchase price to 20 percent or more. They determine the amount required based on the loan type and the borrower’s finances. Certain programs, however, don’t require any down payment. The larger the down payment, the less the borrower will pay each month. Furthermore, they pay less interest over the life of the loan if they have a big down payment.
Credit Score
Mortgage lenders review borrowers’ credit scores to determine how much they will pay in interest. Most lenders require a credit score in the 600s or higher, although a few lenders work with homebuyers whose credit score is in the 500s. The higher the credit score, the lower the interest rate. Borrowers should request their free credit reports from the three credit reporting agencies and comb these reports for errors. Have those errors corrected before applying for a mortgage. If there are no errors but the score is low, hold off on buying a home. Improve the score before applying for a lower interest rate and better loan terms.
Pre-Approval
Borrowers should get pre-approved before looking for a home. Many sellers now require a pre-approval letter before discussing an offer. They want to know if the buyer is serious about purchasing a home and has the means to buy one. When borrowers find a house and need to secure a mortgage, they are not required to use the lender that provided the pre-approval letter. They may choose to use this lender, but they don’t have to.
Remain Flexible
Buyers may have a specific neighborhood in mind or want a home with a set number of bedrooms. They need to remain flexible and open when viewing homes. Most buyers won’t find their dream home already on the market. They might need to buy a house and make a few modifications while remaining within their budget. A knowledgeable realtor will help buyers find homes closest to their needs.
Third-Party Inspection
Nobody wants to purchase a home only to find it has numerous problems they must pay to have fixed. A professional inspection reduces the risk of this. The inspector identifies any issues so the buyer can negotiate the price or ask the seller to fix them before the sale is finalized.
Homebuyers must remain patient as buying a house takes time. Rushing the process can lead to problems down the road. Work with a reputable agent as they walk buyers through every stage of the process. With their help, buying a home isn’t as difficult as many imagine.