What Are The Dos and Don’ts For First-Time Homebuyers?
How to get a mortgage is one of the questions that pop into the mind of first-time homebuyers as they are not quite sure what to expect at the lender’s office. They are often caught between excitement and fear of how it will work out in the end. While the majority of homebuyers familiarize themselves with down payment options and mortgages, they are often unaware of other steps they should take to avoid disappointment at a later stage.
Here is a list of what First-time Homebuyers should and shouldn’t do:
✅ Check your Credit Rating
Before you go to the lender, make sure to have checked your credit report before they do. You’ll know where you stand financially and if your credit rating needs improvement. If you notice any mistakes or slips that don’t go in your favour, you can report them and have them corrected before the lender sees them.
❌ Doubting That You’ll Qualify For A Mortgage
If you have run your credit history and you are not pleased with what you see, don’t despair. It doesn’t automatically mean that there is no way out. Lenders have different mortgage solutions for different applicants, so talk to a mortgage broker to see what options you’ve got. You may also work on reducing your credit card debt or saving up for a down payment before you apply.
❌ Home Hunting Before Getting Pre-Approved
Looking at homes is far more exciting than dealing with the mortgage application, but a mortgage pre-approval in black and white should be your basis for all other actions. You’ll know your price range and only look for homes you can afford. Plus, sellers will see you as a serious buyer and you’ll be able to put down a (conditional) offer right away if a home grows on you.
✅ Picking The Right Amortization Period
Even if choosing a shorter amortization period sounds tempting and would save in interest, it’s not always feasible. Becoming house-poor because your mortgage drains your income doesn’t make much sense. A 25-year amortization period is where many start, but if you can afford a 20% down payment you may opt for 30 years. The monthly payments will be lower, and if you work towards paying it off sooner by making extra payments here and then, you can pay it off sooner.
❌ Not Thinking About Closing Costs
Closing costs usually come about to 1.5% to 2.0% of the purchase price, which means it’s a lot of money, but at least, the lender will make you aware of it in advance. They usually include a home inspection, legal fees, property and land transfer taxes, property insurance and moving costs.
The best you can do is consult a real estate agent who will work with you to find the right home and payment options for you. If you want to know which mortgage programs are available, click here.