4 key mortgage tips for first-time home buyers
Buying a home for the first time can be a daunting process, especially in today’s market where housing stock is tight and home values are high.
If you’re looking for a new home and a mortgage to finance it, it’s important to know how to position yourself as a strong candidate for a loan. It is also essential to buy a house that works for you financially. Here are some tips from Emanuel Santa-Donato, Vice President, Capital Markets and Lead Acquisition at Better, to help you navigate your first home search and mortgage application.
1. Set a budget and stick to it
Buying an overpriced home can leave you with a huge mortgage payment that you might have a hard time keeping up with. This is why it is important to establish a budget before your research.
As Santa-Donato explains, “At the end of the day, you’re the one paying the bills, so you want to make sure you’re successful. Many homeowners are pressured to spend more than their budget, which is a headache down the road. “
To guide your search, Santa-Donato recommends that you determine how much you can afford to spend on all your homeownership expenses, including:
- Property taxes
- Home insurance
You can use a mortgage calculator to see what your principal and interest payments will look like based on your loan amount, down payment, and interest rate, then factor in those other numbers to determine your specific budget.
2. Increase your credit score
Mortgage lenders like Better tend to favor applicants with good credit. After all, your credit score indicates how trustworthy you are, and lenders tend to reward strong borrowers with low interest rates on their home loans.
One of the best ways to increase your credit score is to pay all incoming bills on time. Also, be sure to check your credit report for errors and correct any mistakes that could cause a lender to deny you a loan or keep you at a higher interest rate than you want. If, for example, there’s an overdue debt on your credit report that you never accrued, that’s the kind of thing you’ll want to settle right away.
3. Repay part of the existing debt
While lenders take credit scores into account when approving mortgage applicants, they also focus on existing debt. This is where your debt to income ratio comes in. This ratio measures your existing debt to your income, and the higher it is, the more it serves as a red flag. On the other hand, paying off debt can help lower this ratio into more favorable territory and give the lender more confidence in your ability to meet your mortgage payments.
4. Look for mortgage pre-approval
In today’s real estate market, getting pre-approved for a mortgage is especially important because it sends the message to sellers that you are a serious buyer with the means to follow through on an offer. In fact, if you have a fight with a competing buyer for the same home and only you have a pre-approval letter, it gives you a serious advantage.
Getting pre-approved for a mortgage can also help you narrow down your home search. As Santa-Donato explains, “While your budget helps you figure out how many homes you can afford, having a pre-approval gives you a solid starting point and the ability to be more nimble to compete in this real estate market. fashionable. “
It’s not easy being a first-time buyer, especially in a real estate market like the one we have today. But if you follow these tips, you’ll have a better chance not only of finding the right home, but also of securing an affordable mortgage to go with it.