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The following is a guest post. Enjoy!
For many young adults, there is almost a feeling of excitement that comes with applying for your first credit card or car loan. You may not quite be sure about what to expect, but if you are like so many others, you may be pleasantly surprised at just how easy it is to get approved for the financing you need.
With these types of loan or credit applications, you generally just need to fill out the application, and you’re done. With these experiences under your belt, you may feel confident that applying for your first home mortgage will be just as streamlined and fast. While most first-time mortgage applicants may feel the same way you do, most unfortunately will feel as though they have hit a brick wall when reality sets in.
The Magnitude of the Situation
It may be fairly common for people in today’s society to purchase several homes over the course of their lives, but the fact remains that your home may be one of the most significant assets that you will own. Likewise, your mortgage will likely be one of the most expensive debts that you will take on. The monthly payment that you are committing yourself to may be higher than any other payments that you have, and you may be required to make these payments for several decades of your life. It is important to understand the magnitude of this situation on your end, but it is also important for you to understand that the bank lending you the money is also entrusting you with this debt.
With this in mind, you do want to follow a few steps before you apply for your mortgage:
Review Your Credit Report
Your ability to be approved for the best loan terms possible will hinge in large part on your credit rating. Therefore, take time today to request a copy of your credit report. Ensure that all information that is being reported is accurate. If not, correct erroneous information before you apply for your mortgage. Furthermore, if your credit rating is lower than you would like it to be, consider taking steps to improve it. For example, you could reduce outstanding balances or pay off accounts with a low balance. Also, avoid applying for new accounts until after your mortgage loan has closed. These efforts will help you to boost your credit rating.
Review Possible Loan Terms
With many of the loans that you have applied for in the past, a down payment may have been a recommendation or an option. With most lenders today, a down payment is a requirement for a home mortgage. You generally will be required to provide proof of your down payment as well as the closing costs during the loan application process. By reviewing the loan terms today, you can learn more about the amount of down payment that will be required.
Use Online Loan Calculators
As you research different loan terms, you should put online loan calculators to use. Consider what the monthly payment would be for the loan amount you need based on current interest rates. Ensure that the monthly payment is affordable for your budget. Keep in mind that you will also be responsible for property taxes, property insurance, maintenance and upkeep on your home and other expenses related to home ownership. Furthermore, some of your other expenses may increase when you move, such as your utilities expense. Aside from online comparison sites, first-time homebuyers often seek the assistance of mortgage brokers since they can often find the best deal to suit your financial requirements since they can search among multiple lenders. You want to ensure that your new mortgage will be affordable. In order to do this, you have to create a projected budget based on your expenses after you move.
By completing all of these steps before you get pre-approved, you can more easily apply for your home mortgage with confidence.
How about you all? Were you scared, excited, or a little bit of both before applying for your first mortgage?
What steps did you take to prepare yourself for the home-buying process?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- When I purchased my first home (my current condo) back in 2010, one of the most useful things I did to prepare myself for the process was to read several personal finance books, paying special attention to the sections regarding buying a home.
- By reading these books, I was able to know what questions to ask to make sure I was getting through the deal with the most chance for success.
***Photo courtesy of http://pixabay.com/get/223d8652af15a61c1e7b/1365049150/icon-41335_1920.png
