Tips Before Getting a Mortgage as a First-Time Home Buyer
posted on Saturday, May 21, 2022 in Financial Tips
Most people tend to apply for a mortgage whenever they want to buy a house. With research and extensive planning, becoming a homeowner can be attainable. However, reaching this goal can be tough, especially for first-time buyers. To get the best out of your purchase, here are some tips you can follow before you get your first mortgage.
Be Financially Prepared
Before you go online in search of the house of your dreams, you should take a serious look at your finances. When buying a new home, there will be a lot of up-front costs like the down payment and closing costs. Do not consider purchasing a new house if you don’t have an emergency savings account ready. Some mortgage lenders would have this as a requirement before you get a loan from them.
Besides your savings, you should also check your current credit. Generally, you’ll need to have a good credit score to qualify for a home loan. The better credit score you have, the easier it will be for you to get a loan. Lenders and financial institutions would prefer to limit housing expenses to about 30% of the borrower’s monthly income.
Know What House Type You Want
There are so many options to choose from when purchasing your house. Specific home features like location, layout, and size should also be considered. Each option can have its pros and cons, so you need to decide what you want as early as possible.
Explore Different Mortgage Options
There are a variety of mortgages that are available for a first-time home buyer, each having its down payment rates and requirements. Some of the common mortgages include:
- Conventional Mortgages – These are mortgages that commonly target first-time buyers, requiring you to have a credit score of at least 620 and a 3% down payment. This type is not backed by a government agency.
- FHA Loans – This type is insured by the Federal Housing Administration (FHA). Like conventional mortgages, this is also popular among first-timers with little savings. FHA loans require a minimum of 3.5% down payment and a credit score of 580 or higher.
- USDA Loans – This mortgage is guaranteed by the US Department of Agriculture. USDA loans are more targeted at people who want to get a home in more rural areas of the country and usually don’t require any down payment.
You also have options for your mortgage term. Most homeowners get 30-year fixed-rate mortgages. Some choose to get a 15-year loan instead, but these loans tend to have larger monthly payments.
Choosing the right mortgage can help you finance your dream home. Learn more about your available options by contacting Community 1st Credit Union. Our C1st representatives will be ready to talk to you about your finances.