Buying a home can be a challenging experience for first-timers. Here are some mortgage tips to help get you started.
Start saving for a down payment early
It’s quite common to put 20% down, but many lenders will now permit a much lesser percentage, and first-time buyers programs allow as little as 3% down. Putting down less than 20% could mean higher costs and paying for mortgage insurance, even a small down payment amount can still be hefty.
Explore your down payment and mortgage options
Check out the various loan programs:
- FHA Loan- These are insured by the Federal Housing Administration permit down payments as low as 3.5%
- Conventional Loans- These conform to standards set by the government-sponsored entities Fannie Mae and Freddie Mac, and requires as little as 3% down.
- VA Loans- These are guaranteed by the Department of Veteran Affairs sometimes requires 0% down payment.
- 30- year fixed
- 20-year fixed
- 15-year fixed
- Adjustable Rate
Making a much higher down payment will mean having a lower monthly mortgage payment.
Research your state and local assistance programs
Many states offer assistance programs for first-time home buyers with perks such as down payment assistance, closing cost assistance, tax credits and discounted interest rates.
Determine how much home you can afford
You will need to now what’s actually within your price range. Find your debt-to-income.
Check your credit
Your credit score (FICO) will be one of the key factors in whether you’re approved, and it will help determine your interest rate and loan terms. Speak to an expert about any disputes you may have on your report.
Compare mortgage rates
We recommend comparing at least 3 lenders before making a decision. This could save you more money.
- Ask if the lender allows you to buy discount points (prepay interest upfront)
Get a preapproval letter
As you get closer to buying a home, it’s smart to get a preapproval, where the lender thoroughly examines your finances and confirms in writing how much it’s willing to lend you, and under what terms. Having a preapproval letter in hand makes you look much more serious to a seller and can give you an upper hand over buyers who haven’t taken this step.
In a competitive real estate market with limited inventory, it’s likely you’ll bid on houses that get multiple offers so having a preapproval letter will increase your purchasing power.