If you’ve decided to enter the home market for the first time, congratulations — you’re making one of the biggest financial decisions of your life. There’s naturally a lot to think about within this world, and having your top priorities in order is often very helpful for those in this position.
At Altius Mortgage and our partners with Mortgage Ogden, we’re here to help with all your mortgage and homebuying needs in Ogden and nearby areas, from first-time homebuyers to experienced real estate flippers and everyone in between. What are some of the top themes, financial and otherwise, to have your eye on as you enter this world? Here are several.
Your Finances and What Can be Afforded
One of the first and most important things to think about, of course, is what you can afford in a home. This will be based on many factors, from your current income and savings to your debts and other financial obligations.
Broadly speaking, you should be thinking about how your current expenses and income levels will change after buying a home. For instance, will you be able to maintain the same level of savings? What about if you have to make some repairs or upgrades to the home — can you afford them?
You’ll also want to get a sense of what kind of mortgage you can actually qualify for. There are many different types of loans available, and each has its own set of qualification requirements. You’ll want to speak with a professional about what you can qualify for and how much you’ll be able to borrow.
Down Payment Savings
Down related lines, you’ll also need to have saved up enough for a down payment on the home. The general rule of thumb is that you should aim for a 20% down payment, as this will help you avoid having to pay private mortgage insurance (PMI).
PMI is an insurance policy that protects the lender in case you default on your loan. It’s required if you don’t have at least 20% to put down on a home, and it can add quite a bit to your monthly mortgage payments.
If you don’t have 20% saved up, there are still options available to you. You can look into government-backed loans, like FHA loans, which only require a 3.5% down payment. You can also explore creative financing options, like owner financing or lease-to-own agreements.
Your Credit Score
Your credit score is another important factor to think about as you prepare to enter the world of homebuying. Your credit score is a number that lenders use to determine your riskiness as a borrower. The higher your score, the lower the interest rate you’ll be offered on a loan.
There are a few things you can do to improve your credit score before you apply for a mortgage. One is to make sure that all your bills and payments are up to date. You should also check your credit report for any errors or inaccuracies and dispute them if necessary.
You can also try to pay down any outstanding debts you have, as this will lower your credit utilization ratio — another important factor that lenders look at. If you have a lot of debt relative to the amount of credit available to you, it can be seen as a red flag.
Moving outside the financial realm for a moment, another important thing to think about is where you actually want to live. There are a lot of different factors that can go into this decision, from school districts to job opportunities to the type of lifestyle you want to lead.
For instance, if you have young children, you’ll probably want to be in an area with good schools. If you’re looking for a more urban environment, you might want to be closer to the city. And if you’re hoping to find a more relaxed pace of life, you might want to look into smaller towns or rural areas.
There are endless possibilities when it comes to choosing a location, so take your time and really think about what you want and need in a new home.
Pre-Qualification or Pre-Approval
As you’re entering the homebuying process, you’ll likely come across the terms “pre-qualification” and “pre-approval.” These are two different things, and it’s important to understand the difference between them.
Pre-qualification is a relatively informal process in which you provide a lender with some basic information about your financial situation. Based on this information, the lender will give you a general idea of how much you’ll be able to borrow.
Pre-approval is a more formal process that gives you a more accurate idea of how much you’ll be able to borrow. In order to get pre-approved, you’ll need to provide the lender with more detailed information about your financial situation, including your income, debts, and assets.
The pre-approval process is generally more involved than pre-qualification, but it’s also more accurate. Once you’ve been pre-approved for a loan, you’ll have a better idea of what you can afford and can start shopping for homes within your price range.
Finding a Realtor
While one of our loan officers will assist you with pre-qualification or pre-approval, you’ll need to find a real estate agent to help you with the actual homebuying process.
Your real estate agent will be your guide through the entire process, from finding homes that fit your needs to negotiating the purchase price to scheduling inspections and closing on the loan.
If you don’t already have a real estate agent in mind, you can ask family and friends for recommendations or look for agents online. When you’re meeting with potential agents, be sure to ask about their experience, their knowledge of the area, and their success rates.
For more on what to keep in the front of your mind as you enter the world of mortgages and homebuying, or to learn about any of our mortgage rates or services for Ogden homebuyers, speak to the team at Altius Mortgage today.