4 Tips for Financing Your First Home

After the 2008 financial meltdown we learned that people forget about the tremendous financial responsibility of purchasing a home.

But don't worry, here are a few tips for dealing with the dollar signs.

1) Strengthen your credit score

Since the real estate bubble burst, lenders have tightened their requirements when it comes to borrowers’ credit score. However, the basics remain unchanged: A higher credit score means less risk for the lender.

This typically means you'll qualify for better loan products which means a lower down payment and lower monthly payments. To bolster your numbers, settle any outstanding debts and refrain from applying for new credit for several months prior to buying.

If your credit score is in need of serious repair you may want to look into contacting a credit repair specialist to ensure you're on the fast track to be approved for a mortgage.

2) Secure some savings

Savings are obviously important for a down payment, but you'll want to save more than just that.

A home buyer with at least three to five months' worth of mortgage payments set aside is a much better loan candidate, and, not to mention, in a better state of mind once the first few payments are due.

Additionally, lenders will often give you a little more latitude on other factors if you can show that you have an ample cushion. Also, a healthy savings account also acts as an emergency fund against unforeseen problems or repairs that often accompany homeownership.

3) Get pre-approved

A pre-approval is essentially a seal of approval from a lender stating you can afford to buy a home up to a certain amount. 

Getting pre-approved as a buyer is going save yourself the grief of looking at houses you can't actaully afford. And it's also going to let your seller know that your money is indeed where your mouth is - after all, money talks.

So, a pre-approval will allow you to make a serious offer when you do find the right home. And, unlike a pre-qualification, which is just based on a cursory review of your finances, a pre-approval is based on your actual income, debt, and credit history. You'll also be putting yourself in a better position to make a serious offer when you do find the right house.

4) Do your homework

If you know market trends before you view homes you'll know what to expect when making offer.

For example, we're currently in a sellers market and most homes are sold in multiple offer situations. This means buyers are getting in bidding wars that ultimately drive the prices up and, if your offer was at the top of your budget, you'll quickly be bid out of the race.

Knowing the market conditions before you view homes will allow you to shop in a price range where you'll have the best chance of winning in a multiple offer situation.

Follow these tips and work with an real estate professional, and you’ll go far in ensuring that you get the best deal and the best mortgage on your first home. If you have any questions just give me a call or schedule and appointment on my website.



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