Owning a home is one of those life decisions that everyone has to make. Most people cannot finance the construction of a new home and therefore resort to a mortgage. However, choosing an affordable mortgage from the right lender may be quite challenging if you are a first-time homebuyer.
To make the process hassle-free, we are giving you some tips here to select a mortgage loan.
1. What is Your Budget?
How much are you looking forward to spending on buying your new home? Of course, almost all homes are within a six-figure range, and this is what makes it a bit challenging to decide on what type of mortgage loan you should go for. It is essential to always choose a home based on your budget.
You can use a loan calculator to calculate and discover if the mortgage you are about to take is just within your financial reach. Check Movoto.com to access different homes you might be interested in.
Consider factors such as your income before you can choose the mortgage. Sometimes, it is hectic servicing a mortgage if you get one that is way above your financial ability. Always ensure the mortgage leaves you some room to live your life.
2. Save For Your Upfront Costs
Before you think of applying for a mortgage, you should know that it will probably come with a lot of expenses, such as closing costs and down payment.
The lender expects you to make some down payment before getting the mortgage, and if you don’t have some savings, it may be almost impossible to seal the deal.
If you want to make a good move for a mortgage, you should have a significant amount to offer as down payment so that you are comfortable paying the rest of the loan. Put up as much money as you can to make it stress-free to get a mortgage.
3. Check Your Credit Score
The type of mortgage you qualify for will depend on your credit score. Therefore, you should first check your credit score before you can apply for a mortgage. Most lenders will check your debt-to-income ratio before deciding on the type of mortgage you qualify for.
Review your credit score and find out all the details of those you owe. You want to ensure that you have a clean credit history before you apply for a mortgage.
If you have a bad credit score, you can take some time to fix that. Don’t be in a hurry because this way, you can only qualify for an expensive mortgage. With a bad credit score, most lenders are going to shy away from offering you an affordable mortgage because they consider it a bit risky to ‘trade’ with you.
4. Go for First-time Homebuyer Programs
As a first-time homebuyer, you should not hesitate to ask your mortgage lender if they have custom programs for people like you. In most cases, a lender will partner with some state agencies to provide affordable mortgages for first-time homebuyers. If you are a public servant, student, or veteran, you may qualify for most of the discounted mortgage.
Therefore, when you visit your lender, you should find out if they are offering first-time buyer programs and whether you qualify for such programs. If you are eligible for a discounted mortgage program, you will likely buy your home at a lower price.
Also, you should not forget to bring a list of questions that you want to ask the lender before you can pen the deal. Because your colleague or friend referred you to a lender does not make them the best you can get around.
You have many choices for a mortgage lender from banks, correspondent lenders, and credit unions. All you have to do is take your time to get the right one for the deal.
5. Get a Pre-Approval Letter
A pre-approval letter gives you an upper hand from another buyer who wants to buy the same house. This letter contains all the information that your lender needs, such as your debts, income savings, and credit.
It also indicates the type of house that you can afford. This makes it easier for the lender to consider you as the right buyer. Getting a pre-approval letter helps you discover all the pitfalls you are likely to face in pursuit of an affordable mortgage so that you work on them over time.
When you go for a mortgage from a reputable lender, you may be inclined to choose the cheapest offer you get, but that is not the right move. You should check all the costs you incur by taking the mortgage. Most lenders will charge a high closing cost and a lower interest rate to attract buyers.
Compare different lenders until you get one that is appropriate for you. Always apply these five tips when looking for a cost-effective mortgage for a new home.