4 Tips for Financing Your First Home

Home financing tips

Are you a first-time homebuyer? It can be overwhelming and daunting, to be sure, but luckily there are ways you can prepare yourself when looking to buy a new home, without all the stress that comes with it. Here are four helpful tips to finance your very first house.

1. Get Pre-Approval Mortgage

This is the first step you should consider when looking to buy a house. Getting pre-approved from a bank or another financial institution is a critical step in knowing how much house you can afford. With that piece of paper, you will appear as a more serious homebuyer at open houses and viewings. The sellers know you mean business, and they know whether or not you can afford their asking price. When you take the time to get a formal pre-approval letter, you get more accurate terms based on your actual credit score, debts, and income without having to estimate.

2. Shop Around for the Best Rates

Mortgage rates in Pa. can fluctuate with the market, so it’s important to do your due diligence when searching for the right lender. Not all lenders have the same rates, and you won’t always find the best one at the first place you look. Make an appointment with your community credit union, where a trusted finance professional can help guide you through the home lending process and find you the best rate.

3. Organize Your Finances

This is an important step, as the home loan process can quickly get messy and overwhelming if you aren’t too careful. As you prepare to dive head first into the home loan process, be sure to track down the following key items that may be useful along the way:
• Paystubs
• Bank Statements
• Checking & Saving Account Statements
• Investment Statements
• W-2s
• Tax Returns for Two Years Prior
• Rent Checks
• Property Tax Statements

Getting organized will help you navigate the home lending process more smoothly. With all the important documents in one place, you only have to take your laptop or one folder with you to meetings with potential lenders instead of a messy stack of paperwork that you’re constantly rifling through.

4. Keep Things in Static

In the months between looking for a new home and purchasing one, make it a point to maintain your credit profile and avoid moving money around. This can reflect negatively on your credit report, and that’s the last thing you want when lenders will be poring over every little detail. Don’t change your credit obligations, as it could ding your credit score and lead to an increase in fees related to your mortgage. In the worst case, it could prevent you from qualifying for a mortgage in the first place. In the same vein avoid closing or opening credit cards and keep those balances low so as not to alter your debt-to-income ratio. It may go without saying, but it’s true: don’t splurge on a new car when looking for a house. While the dealership doesn’t mind if you own a home, the mortgage people do mind if you have a whopping car payment every month.

Understanding the Different Types of Mortgages
There are three basic types of mortgage loans: fixed, adjustable and interest-only. A fixed-rate loan means your interest rate is the same for the life of the loan as it was when you first locked it in, with equal monthly payments. An adjustable-rate mortgage is just what it sounds: the interest rate can change year over year, with fluctuating payment amounts. An interest-only mortgage jumbo product allows you to pay only the interest for the first few years of the mortgage, but this is typically only for loans over $625,500.

The type of loan you get will depend on your credit history, your personal preference, your income level, your future wishes (i.e., do you want to take a chance on an interest rate that may be high now but could drop later?) and the recommendations of your mortgage lender. He or she can always provide advice for first-time home buyers who are unsure of the exact terms they want.

When it comes to navigating your way through the home lending process, it always helps to have an expert on your side. Make an appointment with your local CHROME store today, and let us welcome you to the joys of homeownership!