5 Tips For First Time Buyers

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When it comes to getting approved for a first-time mortgage, it might seem like an impossible feat.

However, while it might be harder now to get a foot in the door, it isn’t impossible as a first-time buyer, even with the current state of the economy.

The trick is to know exactly what to do to help you get into the correct position and maximize your chances of being accepted.

1. Know your Credit

One of the biggest mistakes first-time buyers make in the early stages is not knowing what their credit score is or what their credit history looks like. Even the most minor indiscretions can be detrimental to your application, as can anything looking suspicious on your credit file or regular outgoings.

So before you even think of making an application or you are ready to purchase, spend some time getting famiiar with your credit file and knowing precisely what it says about you. From here, you can rectify any mistakes and work on boosting your score for optimal interest rates and the best offers when you are ready to move ahead.

You want to be aiming for a credit score of over 740. However, some lenders will consider applications for those with less-than-perfect scores and histories. However, this could be subject to stricter terms and higher interest rates.

2. Income and Savings

Next, you need to have a justifiable income you can provide to lenders and a good employment history. If you have recently moved jobs or you have worked in multiple places recently, this can hamper your application as lenders want to see you are responsible with your employment and will be able to repay your mortgage on time.

A flakey work history won’t give them much confidence in your abilities.

On top of this, you will need pay stubs, 1099 forms, and tax returns to support your application. Other things that can swing your favor include having savings or other assets that can be helpful should you experience financial difficulties, kind of as a fail-safe.

3. Low Debt-to-Income Ratio

You have probably heard this term bandied about; however, knowing how it will affect your mortgage application is vital.

According to Wells Fargo, lenders will want to see a low debt-to-income ratio, which is ideally 35%, but most lenders want to see it under 43% and absolutely no more than 50%.

Your mortgage repayments, homeowner insurance, and property taxes should also make up less than 28% of your income too. Mortgage lenders will look at this as part of your financial health.

4. A Good Down Payment

You need to know how much of a down payment you will need to get a good mortgage. Ideally, the higher, the better, although recent studies suggest that a person on an average income would need to save for over 20 years to get a 20% down payment as well as stay on top of their household bills.

Luckily there are lenders and grants available for first-time buyers to help them purchase a home with a lower down payment. For example, if you are a first-generation home buyer, i.e., your parents do not own their own home, you might be eligible for a $25,000 first-time home buyer grant application to help you come up with a down payment.

Of course, with all types of grants and government support, you need to meet the required eligibility criteria, so working with a mortgage broker can be advisable in this instance. This brings us to the next point.

5. Work With A Broker

While you might view this as an additional expense, a mortgage broker can be invaluable in helping you find the right mortgage for your needs.

They’ll be aware of all of the support available to you, the types of mortgage on offer, and the interest rate you can expect to pay based on your circumstances.

As they get to know you and your financial position, they can work with you to match you with the best deals and give you more insight into what you can expect once you get the ball rolling. Their advice and support can be instrumental in helping first-time buyers avoid making major mistakes when buying a home.

Conclusion

Buying your first home can be an overwhelming yet exciting time. The last thing you want is to go into this process blind and be rejected for issues you could have easily rectified.

Take your time, do your research, and ensure you are in the best financial position possible to get the result you are aiming for.

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