Purchasing your first home is a major life decision. It’s the place where you (or your family) will live for several years, so you want to make sure it’s comfortable for everyone without being a financial burden to those paying for the property or the mortgage.
Don’t worry. We’ve got you covered with the only first-time home buyer guide you’ll ever need!
Read on to learn how simple the entire process can be!
Step 1: Review Your Financial Situation
Can you afford to buy a property outright, or do you need to go to a mortgage lender for a home loan? Check your finances before you decide on either one.
If you can buy it without borrowing cash, talk to your spouse and make sure it’s the house you both want to get. Perhaps, through your reviewing process, you could end up finding a similar property with a lower price and end up saving money!
However, if you need a mortgage, you need to put in more elbow grease. You need to check your credit score and debt-to-income ratio to guarantee yourself and lenders that you can pay off the monthly installments without defaulting on your loan or foreclosing the house!
Take note, the higher your credit score, the lower your interest rate, and the better your terms for the mortgage.
Step 2: Hire a Realtor
A real estate agent can help you find the best property with the right amenities and location according to your budget. Since this is your first time, we recommend asking your friends and relatives for referrals to save costs.
Step 3: If You Need a Mortgage, Choose Which One Suits You Best
Typically, there are two home loan options available for buyers:
Fixed-rate: This mortgage has slightly higher interest rates. However, your monthly installment expense never increases or decreases. It remains the same throughout your loan so that you can budget payments accordingly.
Adjustable-rate: These start with a lower interest rate in the first five to seven years, then increase at a prescribed time frame (such as annually, bi-annually). So while your earlier installments are more affordable, they are guaranteed to increase over time.
In both mortgage types, you must keep in mind the installment length. Some go for 15 years or 30 years. Shorter installments mean higher installments with low interest, while the opposite is true for longer installments. This decision is up to your priorities of saving more or maintaining a relatively low monthly payment.
Step 4: Canvas from at Least Three Mortgage Lenders
It’s essential to get the best home loan deal, and you’re not going to achieve that by looking at just one option. Get recommendations from at least three mortgage lenders so you can carefully review which one suits your finances best.
Step 5: Get a Mortgage Pre-approval
Do this after you’ve chosen the mortgage that suits you best. In pre-approval, the lender loans you a certain amount, just enough to let the seller know you are serious about buying the home.
Keep in mind that this isn’t a finalized offer. A pre-approval simply states how much you can borrow, what kind of loan you’re signing up for, and the expected down payment you can give.
Step 6: Apply for Your Mortgage
Once the seller is amenable to your terms, seal the deal by applying for your mortgage. You’ll get an estimate that covers the loan and closing costs within three days. Clarify any other fees you may not understand with your mortgage lender.
Step 7: Insure Your Home
Lenders often require home buyers to purchase homeowners insurance to protect the home they’ve invested in. Get in touch with insurance brokers who can help you look for the right policy, depending on the property’s location, climate, and other variables.
Once the property is insured and the mortgage squared away, you can now move into your new home! Follow these seven steps to the letter, as they protect you and your lenders from any financial risks that could negatively impact your budget. While it does take more work, these are investments worth taking to make your first-ever home purchase as worry-proof as possible.
In need of a trustworthy mortgage lender in Colorado Springs that can help you acquire the best home loan for your family? Reach out to Total Lending Concepts today! We offer mortgages that suit every situation, be it conventional, VA, USDA, FHA, and others, that can get you your dream home! Contact us right now, and we’ll show you what a home loan with a TLC feels like!