Researching Mortgages: Start Here
Getting a mortgage is not an easy process, but it’s not impossible either, and millions apply and get mortgages each year. If you are considering buying a home but you are worried, stressed, or intimidated by the mortgage process, there is plenty of information online to teach you about the basics of applying for a mortgage. Doing your own research can help you become more comfortable with the concept, and you can also hire professionals to answer your questions and walk you through each step from start to finish.
Preapprovals are usually the starting point.
Before your home search begins, you will want to get preapproved by a mortgage lender. This involves doing some research on lenders in your area, before choosing one and applying for preapproval. This will give you an idea of the monthly payment/loan amount you can afford which will narrow your search down immediately, saving you and your agent time and energy.
It will also put you a step ahead of other buyers in the market because a preapproval shows a seller that you are serious about buying their home rather than merely curious. This makes it good to have before you begin your home search, so that when you do find your dream home, you can submit an offer quickly with your preapproval.
Myth: 20% down payment.
Most of the time first-time homebuyers are under the misconception that they have to save up 20% of the home’s price for their down payment. While this certainly helps, it is not required. If your credit score is good, your lender can give you a conventional loan with only a 5% down payment requirement. FHA loans are another option, and their down payment requirement is only 3.5%.
Not everyone qualifies.
Another misconception that many first-time homebuyers have is that they will automatically qualify for a special program since they have never bought a home before. While there are many assistance programs available, each is uniquely specific or only for certain regions.
Be prepared for a lot of paperwork.
So many first-time buyers aren’t prepared for the long list of requests for documentation from their lender. It is a good idea to ask for a list ahead of time, or research online, so that you can prepare the documents that will be required ahead of time and provide them when needed in a timely manner.
What’s your comfort level?
The loan amount you can be approved for and the amount you are comfortable spending can be completely different. For buyers who have never made a financial transaction as significant as a home purchase, getting comfortable with how much they are going to be spending is important.
There are also several other costs associated with homeownership that are outside of the home purchase itself. Many first-time buyers make the mistake of only budgeting for the closing rather than taking into account the maintenance costs involved in being a homeowner. Repairs can cost more than many people realize, and if those costs are not estimated beforehand they can come as a bit of a shock later.