5 First Time Home Buying Mortgage Tips
One of the most important aspects of becoming a new home buyer is understanding the process of getting a mortgage.
Here we've outlined 5 essential tips for a successful mortgage application process.
Before you begin house hunting, you have to do a little homeowner prep work first.
The first and most important place to start is understanding the mortgage loan process.
Here are 5 essential prep points first time homebuyers need to know to get a mortgage loan.
1. Know Your Credit Score!
Knowing your credit score determines how much house you can afford to buy. It also can determine how much interest you pay on the loan. Check it early and often during the home buying process.
2. Do the Math. Find Out How Much You Can Afford to Borrow
Once you know your credit score, your lender will be able to give you a rough estimate of what you can afford to buy.
Generally, your monthly housing payment is generally figured on no more than 28% of your pre-tax income.
For total debt ratio, including your mortgage payment, it's usually no more than 36%. These are the most commonly used percentages.
3. Prepare All Legal Documents
This includes employment status, earned income, tax returns, identity documents, and bank statements. Depending on your lender, there could be others, but these are the main ones.
Make sure to have all these documents prepared in advance. It will speed up the application process.
4. Get Mortgage Pre-Approval
If you and another person are both interested in the same property, the one with a mortgage pre-approval will have the edge.
Why? Sellers don't want to waste time negotiating with you if they don't know for sure you can afford to buy their property.
5. Calculate Your Closing Costs
Closing costs typically run between 2%-3% of the mortgage amount. Just like a down payment, closing costs have to be factored into your calculations.
Taking these 5 preparatory steps will put you way ahead of the game.
On a final note, lenders require that borrowers purchase title insurance for the lender, but it isn't required for the borrower to do so.
Banks want to protect their investment, and you should, too! So buy homeowner's title insurance to protect the biggest investment of your life.
When you're ready for that step, turn to Lilly Title & Company. We offer competitive rates and comprehensive coverage, as well real estate settlement closings.