The challenge of purchasing your first home could seem so overwhelming that you might be tempted to just pick the first property you see that’s within your budget, or worse, just continue renting. But, your greatest challenge is that you’ll most likely be not as financially stable as other more seasoned buyers.
Here are some practical hacks to help you enter the housing market and succeed:
Fix all Your Financials
Prior to even shopping around, fix your credit rating and save up for a higher down payment to increase your chances of getting better mortgage offers. First, review your credit report to see if everything’s accurate; plenty of credit card companies do this free of charge, or you could obtain one from credit bureaus for a fee. Basically, to obtain the best rates, you’ll need a 740 credit score or higher.
To increase yours, try paying down your outstanding balances until it’s 30% or lower of your credit limit and void making late payments. A mortgage broker at Primary Residential Mortgage, Inc. suggests that you consider putting down a down payment of at least 20% to avoid paying PMI or private mortgage insurance. If you’re quite not there yet, consider looking at starter homes and saving up.
Consider Alternative Home Loan Options
If you can’t get close to the recommended 20% down payment, or perhaps have a low credit score, somewhere in between 600 and 700, try looking for different mortgage options. You could look in to FHA home loans that would allow you to pay a lower down payment and offer reduced rates than conventional mortgages.
Being pre-approved indicates that a lender has already checked and verified your income, credit, and assets, says a mortgage broker in Fort Myers. He adds that a pre-approved status gives you a one up over sellers who are in the market to sell their property faster, at a pretty sweet deal at that.
Lastly, make sure to speak with different lenders before you look for potential homes to buy. Check which loan options are available to you, each offer’s interest rates, loan terms, and fees, because these greatly vary from one lender to another.