As a first-time buyer the mortgage process can be a very intimidating process.
Mortgage are often quite complicated and involve loads of paperwork.
There are dozens of different types of home loan programs so how do you know which one is best for you?
How do you ensure you end up getting the best deal on your loan?
Here are some first-time homebuyer tips to help you through the lending process.
Picking the Right Loan Type
One of the biggest hurdles first time buyers face is coming up with a down payment for a mortgage. Most conventional loans require a 5%-20% down payment which is hard to come up with. The most popular type of home loan for first time buyers are FHA loans. They require just a 3.5% down payment and just a 580 credit score. Read The Lenders Network idiot’s guide to FHA loans for more information.
Get Pre-Approved First
Before you can start house-hunting with a real estate agent you’ll need to be pre-approved with a mortgage company first. Getting a pre-approval letter is a fairly simple and straight forward process that can be done in one phone call.
A loan officer will pull your credit report and scores to make sure you meet their credit guidelines. Then you will need to provide verification of your income and assets. Copies of your w2’s, tax returns, and bank statements are usually needed before a pre-approval is issued.
Once you are approved you can find a realtor to help you find the right home to make an offer on.
Work with a Real Estate Agent
Some buyers may believe that they are able to save some money by not using a realtor and not having to pay a 3% commission. However, this couldn’t be farther from the truth. In fact, the buyer is not the one that pays the real estate agent, the seller pays the agent’s 3% commission and it’s already factored into the sales price.
Sellers assume any buyer will have a realtor working for them and they expect to to pay their commission. Not having your own agent, especially as a first time buyer will do much more harm than good. You could end up with a worse deal, the mortgage process is something your realtor helps with significantly. Before you start looking for a new home make sure you find a good agent to work with.
Shop and Compare Mortgage Offers
The interest rate and closing fees with vary lender to lender. It’s important you don’t just use the first lender that approves your loan. You can’t be sure you’re getting a good deal until you speak to at least 3-4 mortgage companies.
By getting multiple quotes you’ll be able to know that your getting a competitive rate and not paying too much in closing costs. It will also help you to negotiate lower rates and fees with lenders.
Have Everything Ready to Go
There are many documents that are needed to get a mortgage loan. Tax returns and pay stubs are just a few of the things you’ll need to have handy. You also want to make sure you have the money for your down payment in your bank account for a few months prior to closing. Lenders will not allow cash to be used for a down payment because all funds need to be traced to ensure the money is yours, and not a loan.
The Bottom Line…
Buying a home for the first time can be a daunting task, but it doesn’t need to be.
Have all your loan documents ready, get pre-approved before you start looking and compare multiple lenders. A knowledgeable real estate agent and loan officer can also help you through the entire process from start to finish.