10 Smart Things to Know Before Applying For Your First Mortgage
It takes the right knowledge to get your application approved on the first try.
Researched, written by Amber & The Team
Updated on March 14, 2023
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Applying for your first mortgage can prove difficult and it takes the right knowledge to get your application approved on the first try. Knowing the eligibility criteria can boost your chances of getting accepted and help you land a great deal.
Things To Note When Applying For Your First Mortgage
1. Stay within your budget
There’s your dream home and there’s the home that fits your budget. The latter should have your attention. Fixing a budget keeps you in check and on track toward your goals. When applying for mortgage loans, be realistic about what you can afford.
2. Learn the difference: Mortgage Prequalification Vs. Mortgage Pre-Approval
Mortgage prequalification and mortgage pre-approval are key terms in the home buying process but with distinct connotations. Prequalification checks your credentials and loan eligibility while pre-approval reviews your credit ratings and financial standing. When applying for your first mortgage, knowing both your prequalification and preapproval status is helpful.
3. Your credit score counts
Here’s a future homebuyers credit tip: the higher your credit score, the better your chances of successfully applying for your first mortgage. With a good credit rating, you have a higher chance of having your mortgage application accepted. Reviewing your credit report gives you insight into where you stand with mortgage lenders. If you have a low credit score, these strategies can help you boost your credit ratings fast.
4. Gather the Down payment
A higher down payment would bump up your chances of getting your application approved. Experts advise that you save at least 20% of the overall cost as a down payment or purchase private mortgage insurance.
5. Factor in All Mortgage Costs
Making a down payment isn’t the only mortgage cost. There are other costs associated with mortgages which include agent commissions, application fees, appraisal fees, closing costs, insurance fees, and others. Talk to your lender about all the fees you’ll need to pay before signing the deal.
6. Note that lenders review your employment status
Aside from meeting the 20% down payment mark and having a good credit rating, lenders want to know that you’re capable of making your monthly mortgage payment without any default. One way to make certain of this is by checking your employment status or job stability. No job or stable means of income can affect your application getting approved.
7. Avoid significant financial commitments before applying for your first mortgage
Lenders also keep an eye out for your bank account statement. Making huge deposits or withdrawals at the time of application hurts your chances. Until your mortgage deal is finalized, keep your account stable. If you’re settling an old debt, follow the 50/30/20 rule of thumb which sets only 20% of your after-tax income for debt repayment.
8. Explore mortgage options and decide on the best one for you
Understanding the different mortgage types that cater to your budget can help your application. For instance, most mortgages are fixed rates and don’t change throughout the loan term. However, some lenders offer adjustable rates. Also, a 30-year mortgage is quite common but you can opt for a short-term loan.
9. Gather all the required paperwork
Before applying for your first mortgage, ensure that your records are accurate and up-to-date. Compile financial records, bank account statements, credit reports, or any relevant documents that you might be asked to provide.
10. Research the best mortgage deals
Now, not all mortgage deals hurt your finances. Some offers can help you save. For instance, there are several federal and state arrangements for first-time homebuyers that can help you save on your first mortgage. Exploring various options can help you land the best deal.
How to Find the Right Mortgage for You
Doing your homework on loan types, comparing prices, and checking your loan eligibility are primary ways to find the right mortgage for you.
To purchase a home, enlisting the help of a loan professional can help you through your application. They organize your search which filters your options and lands you a great deal that suits your needs.
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