The Definitive List of Tips for First-Time Homebuyers
Ready to become a homeowner? Get educated with this important information first.
Buying your first home is a big deal. At Justin Bush Mortgage Team, we believe the process should be exciting and fun, not intimidating or confusing. With us by your side to answer your questions and guide you through every step of the process, you’ll feel more confident about your decision and super-stoked about your future!
We also know that you probably prefer to do online research about a major purchase before you decide to speak to someone personally. We’re okay with that, which is why we’ve provided this list of tips for every future homeowner who is about to begin the homebuying process. We’ll start with the first step:
Clean up your credit.
Your credit score is not the only factor in getting approved for a mortgage, but it is an important part of determining what you will be able to qualify for. Here’s how to make sure your score is on point:
Know your credit score before meeting with a lender. It is important to know where you stand before applying for a loan. You can get a free credit report once a year online by visiting annualcreditreport.com.
Verify that your credit report is accurate. Identify any errors and dispute them with the credit bureau as soon as possible. Any unresolved disputes may lower your credit score and delay your loan approval.
Pay down high credit balances. Chipping away at those bills may positively affect your credit score and help you get approved with a better interest rate.
Set up payment plans on any delinquent credit lines. Call your creditors and work out a budget-friendly plan that won’t harshly affect your debt-to-income ratio.
Become familiar with mortgage terminology.
Understanding the terms that are unique to the mortgage process prior to meeting with your loan officer can make everything easier to understand. Explore our Mortgage Glossary to become more familiar with loan and mortgage terms.
Establish your budget.
When you’re trying to figure out how much house you can afford, start with your income. Then be sure to include all of your expenses, including:
Monthly bills (utilities, loans, etc.)
Your costs of living (food, entertainment, etc.)
Estimated property taxes
Estimated homeowner’s insurance
Estimated private mortgage insurance
Potential Homeowners Association fees
In addition to these recurring costs, remember to factor in one-time costs during the buying process, including closing costs and your down payment.
Calculate your debt-to-income ratio (DTI).
Traditionally, lenders will not qualify you for a mortgage unless your DTI is less than 40%. You can change your debt-to-income ratio by either increasing your monthly income or decreasing the amount of debt you carry each month. The second option is usually easier than the first, so pay down as many open credit accounts as you can.
Don’t make financial changes during the loan process.
All aspects of your income and finances are on the table when applying for a loan. Don’t make any major purchases like a car, large appliances or furniture, and don’t move untraceable money into or around your accounts. Also avoid changing employers during the home loan process. Steady employment will likely be a factor in determining what loan you qualify for.
Get a home inspection.
Inspections are important, and in some cases required, to help you fully understand the condition of a home. They can also be helpful for negotiations to help drive prices down or have additional services stipulated in the contract.
Get all details in writing.
During the purchase process, a seller may make a variety of verbal guarantees. For example, the seller may promise to fix the roof before you move in or provide all of the kitchen appliances. Make sure this information is included in writing in any agreements you sign. If an agreement is not explicitly written in a contract, the seller is not obligated to abide by it. This also includes all of the details of your loan. Make sure the amount, payments, rate lock, and other details are clearly stated in writing in a signed document.
Wow, that’s a lot of info!
It sure is! Like we said at the beginning, buying your first home is a big deal. If you’re feeling a little overwhelmed, if you have questions about anything you’ve read, or if you’re ready to begin the mortgage process, we’re here to help!