First-Time Homebuyer Guide
The time has come. You’re ready to make the step from renting to buying. Congratulations!
Buying a home can be an exciting journey, but can also feel like a daunting task at times. We at Minute Mortgage want to help make the journey to homeownership as smooth as possible. Consider this guide to be your Buying a Home 101 course.
Financial Planning for First-Time Home Buyers
Know Your Credit Score
It’s simple: The higher your credit score, the lower your interest rate and mortgage payments will be. A credit score of 740 or higher will get you the best rates and terms and allow you more negotiating power.
Additionally, most lenders require a minimum credit score for mortgage approvals. Your best bet is to have your credit score at least be in the mid-600s. Spend some time taking steps to improve your score if it’s lower than that.
Though it’s no fun having to wait on buying the home you’re dreaming of, you’ll be better off in the long run with a friendlier mortgage rate.
Plan for all Monthly Expenses
Getting pre-approved for a home loan is one thing. Affording it is another. Remember, just because you got pre-approved for a certain amount doesn’t mean you need to spend that much on a home.
A general rule of thumb is to spend no more than 40%-45% percent of your monthly gross income on total housing costs. Keep in mind, it’s not only the actual mortgage that’s considered here. Other potential recurring costs you need to consider when budgeting include:
- Property taxes
- Private mortgage insurance (PMI)
- Home repairs and upkeep
- HOA dues
Have Cash Saved for a Down Payment and Closing Costs
Start saving those pennies, as you’ll need to have cash set aside for both the down payment and closing costs. A minimum down payment of 3% is usually required, and putting less than 20% down will likely result in having to pay private mortgage insurance (PMI) each month.
Closing costs can include loan origination fees, appraisal fees, discount points, title insurance and more. Plan for closing costs to total around 3%-6% of the loan amount.
It may be possible to negotiate a deal where the seller pays the closing costs; consult with your loan specialist about this option. Additionally, many mortgage programs allow you to receive a cash gift for the down payment and/or closing costs. Keep in mind, these gift funds have to be trailed and documented. Don’t accept a gift without consulting with your loan specialist and knowing how to document the funds.
Research and Applying for a Mortgage
What Type of Mortgage Is Best For You?
It’s one of the biggest questions every new homebuyer has to consider. Fixed or adjustable rate? A term of 15 or 30 years? Am I getting the best rate?
Our team of experienced loan experts are happy to answer your questions and guide you into the mortgage that best fits your needs.
Get Pre-Approved For a Mortgage
It’s good to get this step taken care of early in the process. It’s beneficial for both you and your real estate agent to know how much home you can afford before the search starts. In fact, many agents won’t agree to show you homes until they know the amount you’re pre-approved for.
Your loan specialist is going to need a number of documents and will pull your credit report to check your score and look for any red flags.
We at Minute Mortgage use state-of-the-art technology to simplify this part of the process. We require fewer documents than traditional lenders and they can all be easily submitted via our website or mobile app. Just snap a pic and submit.
Find a Real Estate Agent
It’s good to have an expert by your side.
An experienced real estate agent can guide you through the homebuying process, and they’ll negotiate on your behalf for the best deal possible. Agents are also an invaluable resource when it comes to making sure the closing process goes smoothly and free of issues.
Be sure to do your homework and find an agent you’re comfortable working with.
- Check realtor review sites and see what others have said about their experience with an agent.
- Ask for referrals from friends and family.
- We encourage you to meet with potential agents one-on-one before hiring them. Ask questions and make sure they’re a good fit for your needs and personality. Shop around and meet with multiple agents before deciding on who you’d like to work with.
- Minute Mortgage has a team of experienced loan specialists ready to answer your questions and guide you to the mortgage that’s best for you.