Mortgage Tips for First Time Home Buyers
The market may seem challenging for first-time homebuyers due to the lack of some essential home-buying skills that professionals property buyers have gained over time. Buying a home is one of the essential investments in a person’s life, meaning everyone is always looking for the best deal. One of the options that you can consider when purchasing a home is a mortgage loan that will help you finance the project. There are some common requirements in first time buyer mortgage that every home buyer should be aware of before taking one. One typical factor is that the lender will always have an interest in determining whether you can repay. Below are some of the tips that a first-time buyer can use to get a mortgage and be attractive to lenders.
Understand your Credit Score
An individual’s credit score is a critical factor that lenders use to determine whether you are eligible for a mortgage or not. They will also use the score to determine your interest rate and how much you can afford to pay. People with a low credit score always pay higher interest rates because banks take their loans to be of a higher risk than the people who have a good credit history. It is advisable to check your credit score before you start planning for a mortgage to do damage control while time is still available.
Estimate Your Maximum Borrowing Amount
Having an estimate on the amount that a lender will give you is an excellent resource that will help you plan better for your purchase. You can go for a smaller house if the amount is not enough for what you expected or you can find other forms of funding. Avoid making the mistake of going for a huge home that is beyond your means just because you qualify for the mortgage. The mortgage should be within your budget due to the monthly repayments that can turn stressful if you bite more than you can chew.
Have the Required Documentations
Lenders are always interested in knowing whether you are capable of making monthly payments without fail. To understand you better, the lender will require you to provide evidence about your monthly income and other information such as other debts and how much you spend. To get this information, they will need you to submit some documentation such as tax returns, driver’s license, bank statements and some referee’s contacts such as your HR at work. Ensure that you have these documents ready before you knock on a lender’s door.
Get a Mortgage Pre-approval before You Start Viewing Property
A mortgage pre-approval is a document that will always work for you positively. One advantage of the pre-approval is that it gives you a precise estimate of your maximum borrowing amount. The pre-approval is also a useful shopping tool because sellers will view you as a serious seller who already has a source of funding. The pre-approval will also show that you can get a mortgage from most lenders because the lender will conduct a hard check before they provide the pre-approval meaning they will check all the necessary parameters.
Consider Your Available Deposit
Deposit is a significant factor when it comes to a mortgage. The standard for the mortgage industry is 20% deposit for the total amount. There are, however, some specialised loan types that do not require down payment but only a few qualify for those. It is advisable to go for the higher down payment if it is available because it will lower your monthly installments. Less deposit means you have to pay huge monthly deposits to cover the remaining amount.