When it’s the right time to buy your first home it is bound to be exciting looking at the type of property on your wish list. It’s just as important though to give careful consideration to the type of home loan and lender you choose, as it is to deciding on a property. The best way to ensure that you find a great mortgage to finance your home is to save up for a good down payment of at least 20%, and ensure your credit score is excellent before applying for a home loan.
Choosing a mortgage lender is very important and requires some research into the different types of mortgage they offer and the interest rates they carry. You will need to decide the length of the mortgage term and whether you prefer an adjustable rate mortgage or a fixed rate. Make use of online mortgage calculators to assess what the figures will come to.
Don’t be tempted to buy more house than you can realistically afford. Instead remember to factor in all the additional expenses which will come with being a home owner, such as property taxes, building insurance, utilities and home maintenance. Borrowing too much can be a costly mistake.
Research well to find a lender which can offer you what you need at the best interest rate. It is also important to factor in other considerations such as the costs associated with obtaining a mortgage, as they can be extremely costly and vary between lenders. If you have the means it is worth saving up to pay for them up front rather than having them added to your mortgage to accrue interest.
When you start house hunting it is advisable to already have a pre-approved mortgage from a lender to show the seller that you are serious, and ready to act. Being a first time buyer gives you many advantages as you aren’t caught up in a chain, but should be able to fit in with the seller’s required moving dates.
Your chosen mortgage lender may be a bank, a mortgage company or a credit union. They will require documentation from you such as tax returns, proof of employment and income, identification and of course they will run a credit check on you. Order copies of your credit reports far in advance of applying for a home loan so you can check it contains no errors, and assess if you need to improve your score.
Don’t apply for other lines of credit in the run up to applying for a home loan, and pay down any outstanding debt. Your credit score will have a great influence on the mortgage interest rate you are able to secure and can end up saving you tens of thousand of dollars if it is excellent and you have steady employment and low debt levels.
Finally spend some time reading up about mortgages to ensure you actually understand all the ins and outs, and how payments can fluctuate unless you have a long term fixed rate. A little time spent researching and understanding how your mortgage will work will pay off to your advantage in the long run.