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Congratulations! You’re looking into buying your very first home. While this is undoubtedly an exciting time for your family, partner, or perhaps just yourself rocking it solo, it can also be a bit overwhelming. This is your first time around, after all. It’s important to remember that nobody is perfect, and everyone has a lot of learning to do about personal finance. Surely a few mortgage tips can help you along!
From the initial Google searches to walking through the door with keys in hand, everything is a learning curve — and you’ll come out on the other end a much more knowledgeable homeowner. You’ll need to pay attention to a few different aspects of the process to get there. With a few mortgage tips, you can find yourself in a much more solid position as you continue to learn and grow:
1. Shop Around for Rates
One of the biggest mistakes new homeowners tend to make is taking the first mortgage offered to them. While you could very well find a good deal the first time around, shopping around for different rates can save you tons of money in the long run. People often fear this will negatively impact their credit score. But, as long as you do all your applications around the same time, one inquiry will have the same effect as a few, and your credit score won’t suffer.
2. Avoid Overextending Yourself
Just like with your credit, rent, and little luxuries, it’s important to remain within reason. You might get approved for a certain amount, but that doesn’t mean you have to go for it right away. Consider your budget, not just the bank’s perception of what you can afford to spend. Since a mortgage is a big commitment, you should look closely at what you can sustainably afford long term.
3. Have All Your Documents in One Place
It can be easy for mortgages, applications, brochures, and your own financial information to feel like an impossible stack of paper you can never wade through. It’s more effort up front, but keeping a staunch organizational system can help you navigate the process with much more ease. From your social security and identity information to income documentation to your taxes, having everything on file can be a lifesaver.
4. Get Pre-Approved, Then Start Looking
You aren’t required to get a pre-approval before you shop around for houses, but it can prepare you to put in an offer if you find something you love and don’t want to let it slip through your fingers. When you put in an offer with a pre-approval, it shows that you’re serious and can handle the financial responsibility of homeownership. It’s the same as a full mortgage approval in the practical sense, so getting one can make the whole process easier.
5. Get to Know Your Credit
Your credit score has a pretty large bearing on the approvals and interest rates you have access to. Figure out what your credit rating means by calculating and asking around. If you have a higher credit rating, this could mean great things for your interest rates, but if not, there are still options available for you.
If you can afford a Federal Housing Administration (FHA) loan, this could be a great option. While a bit more expensive, these loans are designed for people who don’t meet standard mortgage qualifications.
6. Avoid Using Credit Between Applications and Closing
For the love of all that is good, don’t do weird things with your credit before you have the keys in your hand. Your credit doesn’t just get pulled up once and put back underground. Lenders will pull up your credit a few times during the process, including right before you close. If big changes are present, your mortgage situation could shift — you could even get disqualified.
If you’re looking to make another big investment or change in your finances, it’s best to wait until after this process is finished. This key mortgage tip will keep you safe up to the closing date.
7. Take a Breather
It can be easy to get caught up in all the numbers and lingo. Just remind yourself how far you’ve come and that it’s okay to chill out for a moment. Millions of people have gone through this process before. You’re not the first, and you won’t be the last. It may feel like a lot right now, but you’ll be okay.
Start on the Path to Homeownership
After following these mortgage tips, you’ll soon find yourself in the home of your dreams. No matter what route you took to get there, you’ve made a huge accomplishment. You should be proud of yourself, no matter what the numbers on the paper look like.