How To Get A Home Loan: Guide For First-Time Homebuyers
Are you looking to obtain your first home loan?
Buying your first home is a huge undertaking. A lot of decisions must be made and one of these concerns your home loan. There are numerous financing options available, but that doesn’t make the final decision any easier.
The key to making the most out of your first home purchase is reading up on the basics of property financing. In the long run, proper research and knowledge can save you a surprising amount of time and money, says Onsite Property.
Now we are going over the main things you should know about getting a home loan. You’ll learn about the various loan types, common requirements, and the important factors to consider before obtaining a home loan.
What Type of Home Loans Are Available?
Certain home loans work better under unique circumstances. When you pick the right type of mortgage loan, you’ll save money on fees, down payment, and interest.
These are the most common types of home loans available today:
- Fixed-rate mortgage. This type of loan is a conventional choice for most first-time home buyers. The fixed-rate mortgage involves a single interest rate and monthly payment. Usually, the loan lifetime is 15 or 30 years.
- FHA loan. The Federal Housing Administration loan has a very liberal down payment. Since these loans are backed by the government, you can put down a minimum of 3.5%. This is much less compared to typical home loans that demand a down payment of 20%.
- Adjustable-rate mortgage (ARM). Is your credit score on the lower end? Then adjustable-rate mortgage might be your best solution. The interest rates are lower for a fixed period. Then the interest rates are annually adjusted in light of the current interest rates.
- Jumbo mortgage. This is a conventional loan with limits that go over the federal loan limits. The jumbo mortgages work well for buying a home in an expensive neighborhood. But you need to have a high FICO score, great debt-to-income ratio, and plenty of assets on your savings account or in cash.
Top Tips on How To Get A Home Loan
#1: Compare the Offers
Never rely on quotes provided by a single lender. Compare the offers from numerous loan providers to find out which one of them provides the best terms. Note that interest rates aren’t the only criteria. You should account for various fees that accompany the loan offer.
#2: Check Your Credit Score
A good credit score attracts better deals on your home loan. Get a credit report before getting quotes from lenders. Sometimes you may discover that some improvements are needed to boost your score.
#3: Use a Mortgage Calculator
There are many mortgage calculators online that demonstrate the financial implications of various loan offers. By using these calculators, you’ll have the possibility to compare the lenders and establish realistic expectations for the loan amount you can sustain with your income.
#4: Save More Money
It’s recommended to have at least half a year’s worth of loan payments in your savings account. This is the best approach because if there are going to be unexpected events, you are still able to continue paying for your home.
Biggers savings come in handy when you are deciding how much you can have as your down payment. The more you’ll pay down in the beginning, the less stress and costs you have to incur in the long run.
#5: Get a Preapproval
Mortgage preapproval has two major benefits. First, you’ll find out what is the potential lending range under your circumstances. The other benefit is that sellers will have proof that you carry the financial backing needed to close the deal.
#6: Avoid New Debt
Did you know that lending companies check your debt-to-income ratio? You should pay down any existing debt, if possible. And avoiding the accumulation of new debt is essential. When you have a high debt ratio, many lenders may turn down your home loan request.
In a nutshell: How to Get a Home Loan
When you are looking for the means to purchase your first home, getting a home loan is the best course of action for many buyers. Follow these tips and suggestions to minimize the costs and worries related to your home loan:
- Check your credit score and make some improvements if necessary.
- Save as much money as you can and pay down any debt.
- Get a preapproval to see your expected mortgage range.
- Weight the pros and cons of different types of home loans.
Brian Chandler of RE/MAX Alliance in Parker Colorado specializes in homes for sale and consulting with homebuyers on current housing inventory. Brian is a Top Agent Realtor with over 40 years of sales experience.