Top 8 Things to Consider When Getting a First Time Homebuyer Loan
People who are considering a first time home purchase have some homework to do before they can get a homebuyer loan. As interest rates continue to hover at the lowest levels in history, there is certainly a strong case to be mad for renters to become homeowners. In many cases first time home buyers are actually in a position to reduce their housing expenses monthly. You have to get qualified to buy the house and there is process involved that you need to follow before making such a major commitment.
Read on to learn the key considerations when getting your first home mortgage:
#1 Check Your Credit Score
To qualify for the best mortgage rates – around 4% these days, you will want a credit score above 700. Generally, the minimum FICO score that will be considered for a mortgage in 2016 is in the 640 range.
As you are checking your credit score, remember these tips and tricks to give it a boost:
#2 Collect All Documentation
#3 Save Down Payment
#4 Get a Mortgage Pre-Approval
If you have so-so credit, consider an FHA, government-backed mortgage, which offers low interest rates and down payments. FHA also has programs that are made for first-time home buyers, and can be a great choice if you have subpar credit and little down payment. Not every lender offers FHA loans, so you will have to shop around.
#5 Work Out Your Budget
We recommend using a home affordability calculator to give you a good idea of your new monthly budget.
#6 Research Different Types of Loans
#7 Remember Closing Costs
Expect to pay somewhere between 2-5% of the purchase price of your home in closing costs.
#8 Do Not Overspend After Mortgage Approval
Many first time homebuyers learn this the hard way. It is understandable to want to go out and buy new furniture for the house, but you should not be opening new credit accounts to pay for it.
Keep these seven tips in mind to make your first homebuyer loan go smoothly.