Buying your first home is an exciting experience, and you can make the process easier by arming yourself with knowledge. Set yourself up for success when applying for a mortgage with this simple list.
Knowledge is Power: Simple Advice for First-Time Homebuyers Applying For a Loan
Feeling ready to take the next big step in your life and purchase your first home? Congratulations! Becoming a homeowner is a hugely fulfilling and rewarding rite of passage. As a lender focused on helping our clients build stronger futures, we love working with first-time buyers. Here are five things we think you should know before you start the process.
1. Loan Experts Should Be Available and Helpful, Even Before You Apply
If you’re ready to buy a home, chances are that you’ve built up your credit history by doing things like opening credit card accounts or applying for other types of loans. The process for these things is often as impersonal as it is quick—you fill out a form on a bank’s website and wait to hear if you’ve been approved or not.
The process of applying for a mortgage is more complicated than that, and your Mortgage Advisor will act as your guide throughout the process. This is part of the reason why it’s a good idea to talk to lenders before you start shopping for a home. You’ll want to work with someone dedicated and available to answer any and all questions. Communication is key!
2. Stability Is a Good Indicator of When to Apply for a Mortgage
Buying a home is a commitment that pays off both literally and figuratively over time. This means that stability is important when you consider when to buy. If you’re planning any major life changes, such as a big career shift or divorce, you may want to wait to apply for a mortgage.
It’s also generally best to think about buying when you have minimized the amount of debt in your life. Reducing debt is one way of introducing stability into your life. But don’t get too hung up on that point—it’s normal for adults in the USA to carry debt, such as student loans, and the presence of that debt won’t immediately disqualify you from consideration for a mortgage.
3. There Are Multiple Different Types of Loans
First-time buyer loans are generally straightforward: they’re loans designed for people who’ve never owned a home. However, that doesn’t mean this is the only kind of loan you can qualify for. Based on your situation, there may be other loans out there that are better suited for your needs. For example, if you’re a veteran of the U.S. Armed Forces, you may qualify for a VA loan that offers better terms than a first-time homebuyer loan.
This is another area in which a helpful Mortgage Advisor will make a huge difference in your homebuying journey. While you can do research on your own and learn more about the loan types available to you, it’s always helpful to have an expert available to answer questions and provide guidance.
4. You Can Be Strategic in How You Apply
The mortgage application process is designed to assess an applicant’s personal finances. But you don’t need to be perfect in order to qualify. In fact, it’s completely permissible in many cases to be strategic in applying for a mortgage. This may mean bringing on someone like a financially stable parent to act as a co-signer, but it can also mean leaving someone off the application too.
For example, married couples tend to apply for mortgages together. However, some couples are in a situation where one spouse’s credit score is much higher than the other’s. If this is the case, you might be wondering, “can I apply for a mortgage without my spouse?” The answer is typically yes, though you’ll want to talk to your Mortgage Advisor about it. If ever there was a time to not make assumptions, it’s during the homebuying process!
5. Think About the Big Picture—Not Just What You Want Right Now
As we said above, buying a house can have a hugely positive long-term impact on your life. But this can mean many things. It might mean that you get to put down roots somewhere you love, with steady monthly payments as rental rates continue to climb every year. But not everyone ends up living in their first home forever.
One of the ways becoming a homeowner can be beneficial is by providing you with the opportunity to upgrade to a bigger home when you’re ready, but keep your first home to rent as an additional source of income. If that sounds appealing to you, think about what kind of home you’d need right now versus 10 years in the future. You may not need a large single-family home right now, for example. Buying a condo in a popular neighborhood could be a great way of setting yourself up to earn rental income in the future.
Similarly, some people think about the future in terms of aging parents when they buy. Purchasing a duplex or a home with room for an accessory dwelling unit (ADU) could give your parents a safe, nearby place to live once they retire.
Ready to get the process started, or curious about what we’ve discussed here?
Call Tim today to take a confident next step in your homebuying journey.