Buying your first home is a time of excitement. As you shop around for your new home, you will certainly find that there are many to choose from. Buying a first home requires that you take your time and learn all you can about the home buying process so that it will go as smoothly as hoped and without any regrets later. Here are some tips to help you get your first time home mortgage.
Get Your Finances in Order
When you go to apply for your first time home mortgage, or any mortgage, you can be sure that a lender will look carefully at your personal finances before extending you a mortgage these days. One very important consideration is how much debt you already have.
Most lenders will demand that you have no higher than a 36% debt to income ratio. This means that once you get your first time home mortgage, that your monthly payments are no higher than 36% of your monthly income. If your debt is currently high, then you can almost be certain that you will not be able to get a mortgage or a new house until the debt is reduced.
In addition to reducing your debt before applying for a mortgage, you also want to ensure that your credit report is looking good. It is not uncommon that mistakes may appear on it, which could lower your credit score. The lower that your credit score is, the higher your interest rate is going to be on your first time home mortgage – something you can do without.
Get Pre-approved for Your House Mortgage
Buying your first home will take less time and less hassle if you go to your lender, once your finances are in order, and get pre-approved for your first time home mortgage. This will enable you to know exactly how much of a home mortgage you can get, and will help you narrow down the homes that you can look at for consideration.
With a pre-approved mortgage, you also will have greater buying power and you will find that sellers are more willing to talk to you. It will also give you greater bargaining power, too, because many sellers want to sell quickly, and you will be able to show them the money up front.
Understand the Home Buying Process
In order to save money on your first time home mortgage, you need to understand exactly what is going to take place when you come to the table. There will be a lot of fees attached, and it can add as much as 8% more to the cost of the house.
Knowing what is involved, however, will give you possible bargaining power with the home seller. Before you buy your first house, you have opportunity to work out some details with the seller and possibly share some of the closing costs.
Other ways to lower the final closing costs and size of the monthly payments on your new first time home mortgage would include a larger down payment. When your down payment is more than 20% of the value of the house, you are not required to buy private mortgage insurance (PMI). You also may want to consider buying points, which may give you a lower interest rate.