Purchasing a home can be exicting, confusing and complicated, especially for first-time homebuyers.Like many of life’s ‘firsts,’ it’s important to be as prepared as possible. Here are a few pointers to help you get started on your homebuying journey.
- Know your credit report
One of the first things a lender looks at when you apply for a mortgage loan is your credit score – and you should, too. Many lenders base their decision on your loan amount and rate, in part, on their confidence in your ability to repay the loan. The higher your credit score, the easier it may be for you to get the loan amount and rate you want!
If you don’t know your credit score, you can get a free report once a year from three credit bureaus: Equifax, Experian and TransUnion. It’s a good idea to see what’s on each report so you can make sure your information is accurate, your address is current, and you can resolve any error that could be negatively impacting your credit score.
- Be frugal with your credit card
The percentage of your credit limit that you use monthly can also negatively affect your credit score. Try to save credit card use for necessities and should any emergencies arise.
- What can you afford – realistically
Buying your dream home shouldn’t mean you’re living in a dream! Be realistic and know what you can afford so you’re not ‘cash poor.’ Write down your monthly expenses such as your credit card, phone bill, car insurance, groceries, etc. List your income and sources and note how much you plan to contribute towards your down payment and closing costs. Think about interest rates, private mortgage insurance and loan programs based on your specific financial situation. Have all this information handy when you talk with your loan originator.
- Create a budget
Once you’ve jotted down your expenses and income and have an idea of the cost of the home you want to purchase, you may find you want to increase your income. You may want to get a second job, work overtime for extra income (if your employer offers that option) or sell things online that you don’t need. Save all the extra money for costs associated with homebuying.
- Down payment and closing costs
When you put down more money up front, you pay less each month. Plus, the larger your down payment, the more options you may have in terms of an interest rate and loan program. A good rule of thumb is to plan on a down payment of at least 3.5%. Your loan originator can help guide you and provide you with a breakdown of costs so you can plan accordingly.
These are just some of the ways you can prepare for your homebuying journey. Afterall, we want you to love your mortgage experience!
Ready to learn more? Contact an Envoy Mortgage loan originator to discuss which of our loan programs is right for your financial situation. To locate a mortgage loan originator near
you, click here.