Making the move to buy your first home brings anxiety and challenges. What can make the process smoother and reduce your concern is doing some upfront work when applying for a first mortgage. Some important first-time homebuyer’s tips, and steps to take on the road to homeownership include:
- Establish a Budget
- Get Preapproved
- Anticipate Additional Home Costs
- Get a Home Inspection
Know What You Can Afford: This can trip your first mortgage application right out of the gate. Establish a budget, make a list of all your monthly expenses. Exclude your rent, but include vehicle costs, student loan payments, credit card payments, groceries, health insurance, retirement savings. Go through your personal spending check list and include it in the budget. You also want as part of your budget upcoming vacation plans and insurance premiums. Add it up and subtract from your take-home pay and you'll know how much you can spend on your new home each month. Then calculate the result using a mortgage calculator to research current interest rates. This will give you an estimate of a total mortgage payment.
Getting Preapproved: What you think you can afford and what the bank is willing to lend you may not match up, especially if you have poor credit or unstable income. Get pre-approved for a loan before you even start looking for a new home. If you don't, most sellers and their real estate agent won’t consider an offer until you have a bank’s preapproval. Your own real estate agent will want you to have a preapproval as well because they never want to have you sign a purchase agreement and then discover later that the bank won't lend you what you need, or that it's only willing to give you a mortgage that you find unacceptable. Getting preapproved gives you and your agent to shop with confidence. In today’s competitive market, preapproval is a must.
Prepare for Additional Homeowner Expenses: Once you're a homeowner, you'll have additional expenses on top of your monthly mortgage payment. Unlike when you were a renter, you'll be responsible for paying property taxes, insuring your home against disasters and making any repairs the house needs.
Get an Inspection: Before closing on your first mortgage, you must know what kind of shape your new home is in. You don't want to get stuck with a money pit or with the headache of performing a lot of unexpected repairs. Keeping your feelings in check until you have a full picture of the house's physical condition and the soundness of your potential investment. It will help you avoid making a serious financial mistake.
Buying a first home and taking out a first mortgage can seem overwhelming, and it isn't without potential pitfalls. If you're aware of those issues ahead of time, you can protect yourself from costly mistakes and shop with confidence. Your home may be the largest purchase you will ever make, but it need not be the most difficult.
At ChoiceOne Bank our mortgage professionals are ready to help you apply for your first mortgage. Get preapproved today!