First-time home buyers experience a whirlwind of emotions. When you're feeling excited, proud, or nervous, the mortgage process can be overwhelming. Don't worry, it doesn't have to be! Wherever you are on your home buying journey, ClearPath Lending is here to give you the confidence to move forward.
Even when everything is new to you, getting your first mortgage will be much easier to manage with a little preparation. Whether you've already chosen your dream home or are just starting out looking, these tips provided by ClearPath Lending mortgage experts can help make the mortgage process easier.
Order your credit
When you start preparing to become a first-time homeowner, the first thing to do is take a look at your finances. Your credit score and credit history are the most important factors that will be considered for your mortgage.
If you have good credit, it will be easier for you to qualify for the loan. If your credit score needs to be in better condition, it is best to work on this before applying for a mortgage.
Here are some tips to clean up your credit:
- Review your credit report and look for errors, unpaid items or accounts in collection management
- If necessary, file litigation to fix any errors in the report
- Cancel any credit card with high balances
- Try not to make other major purchases, like taking out a car loan, right before you apply for a mortgage. If you need help getting your finances in order, talk to your financial institution to see if they offer free financial counseling services that will help you.
Gather documents about your income
Income is one of the factors that lenders will look at before granting you a home loan. Since a mortgage is a long-term commitment, lenders want to make sure that you will be able to pay off the loan over time.
That is why lenders will ask you for various documents related to your income when applying for a mortgage. Make sure you have all the documents in order before applying for a mortgage. You may need recent pay stubs, bank statements, and W-2s for the past few years.
There are also certain factors that may arise based on your job. For example, an independent contractor or self-employed person may need to show lenders a more extensive earnings history.
Control your expenses
It is also important to monitor your own spending habits before applying for a mortgage for the first time. A mortgage is an important decision that will last for years, so make sure you understand how the loan will accommodate your current and future expenses.
It may be a good idea to monitor your spending for several months to see where your money is going. Whether you use a pencil and notebook or budgeting tools, by keeping track of your spending, you can begin to appraise homes more easily.
Since this is the first time you are buying a home, consider the additional costs you may face in the future. Tenants usually have a landlord to turn for things like repairs or pest control, but homeowners must have emergency funds set aside to cover these events.
Determine what you can afford
Once you've tracked your expenses and examined your income, you should be ready to figure out how much you can afford on a home and what your down payment would be.
Don't worry, it shouldn't be an exact calculation. Nevertheless, knowing how much you can reasonably afford will help you find the right home and the best loan to get you there.
Find the right mortgage
After you've figured out the price range you're looking for, you're ready to choose the right mortgage type for you. This phase requires more research to determine which loan is best suited to your specific needs.
You should know your options, the difference between a variable rate mortgage (ARM) and a fixed rate mortgage, before choosing the loan.
Take a moment to learn about special first-time homebuyer programs that can help you save money. The time you spend learning about your options will pay off when you get the keys to your first home one day! If you have any problem navigating any twists and turns you may encounter, ClearPath Lending mortgage specialists would be happy to happy to answer your questions and help you with your application.