Advice for First Time Homebuyers

We offer a wide range of home loan services at Altius Mortgage, and some of our most common customers are first time homebuyers. The process of applying for loans can be confusing to many, especially if you’ve never done it before, and we’re known for the way we keep things simple and straightforward to help you and your family get the loan you need.

Many of our services won’t come into play until we review your specific situation, but there are also several bits of broad knowledge we try to impart on our clients before they ever get started. Here’s a sneak peek: A few pieces of advice for entering your first mortgage situation with your ducks in a row.

Assets and Liabilities

More people know about credit score (more on this in a moment), but lenders are also very interested in your general financial profile. They want to know your general monthly expenses, and how those compare to your income. They want to know if either of these elements is going to change anytime soon, especially the expenses side which might impact how quickly you can pay back a loan. A solid understanding of your own situation here, plus the ability to explain any potential discrepancies, can go a long way.

Credit Score

Credit score is the other vital financial factor. Lenders look closely at this, both for whether or not you’ll be approved and for smaller details within the individual loan. Your mortgage rate can be heavily impacted by credit score, for instance.

Luckily, staying on top of this is easy. There are a number of free services out there to tell you where your score stands – just make sure you get on top of this process well in advance, as much as six months or a year in most cases. This will give you time to correct any issues you may find.

Organization

Throughout the process, staying organized and level-headed is very important. There are several little details which can torpedo the whole thing if you lose track of them, so keep a good list of things like important documents and various due dates.

Patience

Credit score isn’t the only area of this process you should be well out ahead of. A home loan might be the most important purchase you make in your life, and getting the details wrong on your very first one doesn’t set a good baseline. You should begin your search months in advance of potential move-in dates, and be prepared for it to take a while. Shop around for the best deals – ask questions and be as specific as you can. Leave no stone unturned in this process, and more importantly, leave yourself the time to make that happen.

To learn more about first time homebuyer tips, or any other element of our mortgage services, contact one of our expert brokers today.

Loan Tips for First-Time Homebuyers

If you have been dreaming about buying your very own home, there has really never been a better time than right now. Home prices are relatively stable, and interest rates have been at record lows for quite a while. Plus the months between March and July are usually the best times of year to find inventory on the market. Before you dive into your home buying experience, though, there are a few things you should know as a first-time homebuyer to ensure that you get the best loan and the best rates.

1: Know and Understand Your Credit Score

Your credit score is perhaps the most important number in your life when it comes to getting a mortgage loan. Even small changes in your credit score can have a significant impact on your interest rate, so before you start shopping for a home, check your credit score.

Credit scores are expressed as a number between 300 and 850; higher scores mean that lenders are more confident in your ability to repay a loan. Generally a score of 720 or above is considered excellent credit, 650 to 720 is good, between 500 and 650 is fair or poor, and below 500 is considered bad credit, although each lender might have its own ranges that differ slightly from the ones above.

2: Have the Best Credit Possible When Going for a Loan

If your credit score is lower than you would like, it might be a good idea to wait a little while before applying for a loan. Take these steps to improve your credit score:

  • Pay all your bills on time
  • Review your credit report for mistakes and fixing any problems
  • Pay down high balances on your existing credit accounts
  • Don’t take out any big new loans (student loans, car loans, etc.) in the months prior to getting a mortgage loan

Fixing a lower-than-desirable credit score can take some time, so you should start this process about 6 to 12 months before you plan to get your loan.

3: Have Your Documentation Ready

In order to get a loan you will need to have documentation of your income and taxes. Typically lenders like to see at least two paystubs, and two years’ worth of W-2s and tax returns, as well as bank statements from the last couple of months. If you are self-employed or you are paid on commission, be prepared to provide even more documentation of your income to qualify for a loan.

4: Set Your Budget

Ideally you should already have an idea of how much you want to spend on your monthly house payment, which will give you an idea of how much you can afford to borrow, but it’s always a good idea to track your spending for a few months to be sure. Keep in mind that most mortgage payments also include homeowners insurance, property taxes, and mortgage insurance (if you are not putting 20 percent down), so your calculations need to take that into account. Most lenders prefer that homeowners spend less than 28 percent of their income before taxes on a house payment, and less than 36 percent of take-home pay on a mortgage.

When you’re ready to get started, the next step is meeting with a knowledgeable mortgage lender in Utah to find out what loan options are going to work best for you and getting pre-qualified so you can start looking for the home of your dreams.

Common Mistakes First-Time Homebuyers Make

When you start preparing to purchase your first home, there are a lot of things to be excited about, and a long list of things you need to do to make sure you are able to get the home you want with a mortgage loan you can afford. Unfortunately it’s a process that can sometimes be confusing, which leads to some of these first-time homebuyer mistakes.

1: Not Getting Pre-Qualified for a Loan

As you start imagining your new life in an awesome house, one of the first things many people do is start their search for the perfect home. You might have an idea in mind of how much you want to spend, but if you don’t get pre-qualified for a mortgage loan you may find out later that you are unable to get approval for the loan you thought you could get, which can be disappointing if you already fell in love with a home in that price range. Pre-qualification will give you an idea of how much you could potentially borrow (without requiring any commitments) so you can search for the ideal house in that range.

2: Confusing Pre-Qualification and Pre-Approval

It’s also important to note that pre-qualification is different from pre-approval. During pre-qualification you supply a lender with a snapshot of your overall financial picture and they give you an idea of the mortgage for which you could probably qualify. This amount could change during the pre-approval process, though, since pre-approval involves a review of your credit score and a more in-depth analysis of your finances. Pre-approval carries more weight than pre-qualification, and can show sellers you are serious about the purchase and that much closer to getting a loan.

3: Calculating Only Principal & Interest in Payments

Principal and interest are the bulk of your total monthly mortgage payment, but they are not the only calculations to include. Your monthly payment will also include homeowners insurance, property taxes, and private mortgage insurance (PMI) if you are unable to put 20% down at the time you purchase the home. Depending on where you live, you may also have homeowners’ association (HOA) monthly dues that can be up to hundreds of dollars each month. If you’re upgrading or moving farther away from work, it’s important to also calculate higher costs for things like heating, cooling, and electricity, as well as increased gas costs to commute.

4: Getting New Loans While Shopping for a Home

This is a big one— first-time homebuyers sometimes make the mistake of making other big purchases with credit or loan accounts before their mortgage contract is closed. Lenders will pull your credit reports right up to the day of your closing to make sure your financial situation has not changed, and if they see significant large purchases or additional debt it could put your mortgage in jeopardy. You may be excited and want to celebrate with the purchase of furniture, appliances, or even a new car to go with your new home, but wait until after the mortgage loan is closed to do so.

5: Using Up Savings for Down Payments

It’s great to be able to put a down payment on your home, and most loans require at least a small down payment. However, even if you have 20 percent of the purchase price it’s not always wise to put that down on your home, especially if it means wiping out your savings. Talk to your lender and be sure you understand the implications on your monthly payments, PMI, and other costs so you can determine how much to put down and how much to keep in savings.

To avoid making these mistakes, always work with a qualified mortgage loan company in Utah.