Buying a new home can be a nerve-wracking process in this market – especially if you’re a first-time homebuyer. Unfortunately, this is also one of the most expensive purchases you’re likely to make. As a result, it’s important to have as much information as possible at your fingertips, so that you are well equipped to make an informed decision. From checking your credit ratings to speaking with housing financiers about appropriate mortgage rates, young homebuyers need to go into this process with their eyes wide open.
The process of seeking approval for a mortgage might seem daunting to a first-time homebuyer. What is a mortgage? It’s simply a loan taken out to buy property or land. The following are some key things to consider when beginning this crucial process:
- Calculate your income and your monthly debt obligations
The first step in preparing to apply for a mortgage is to keep track of your monthly income and debt payments. Start collecting these because your mortgage lender is sure to ask for them. Getting approved for a mortgage will depend on whether you are staying within certain ratios. These ratios are used by lenders to determine whether you can afford to pay for your mortgage. Additionally, big debts you might already have to your name will affect the size of the mortgage you will receive. Use a Loan Eligibility Calculator to help you determine the amount of mortgage that you can avail.
- Obtain your credit history
Before applying for a mortgage, you will need to obtain both your credit score and your credit history report. You will need to verify that there are no errors on your history statement, since any major discrepancies can greatly affect whether you will be approved for a mortgage. Additionally, it’s ill-advised for you to apply for new credit in the months leading up to you sending in your mortgage application. Banks will typically be suspicious if you suddenly have new credit right when you are applying for a mortgage.
- Comparison Shop for Mortgages
Start the process by calling one of two local banks and asking for a loan estimate. For comparison, you can also look online. You can get several mortgage quotes fairly quickly on the internet. When you compare your estimates, remember that banks also include closing costs into the final cost of the mortgage, so always ask about their policy. If you need additional help finding a suitable mortgage rate, it might be worth hiring a mortgage broker.
In short, while the prospect of buying a home might seem intimidating, ultimately, it will be one of the most rewarding purchases you make in your lifetime. By being realistic about the size of mortgage you can afford and being careful about the process from beginning-to-end, you are sure to find a mortgage that works for you and your family.