Are you looking to take out a home mortgage for the first time? If this is your first time taking out a home mortgage, there’s no doubt that the experience can feel overwhelming.
However, with the right information, taking out a mortgage can be easier than you think.
Check out this guide to discover what you need to know about your first home mortgage.
Know Your Credit Score and What it Means for Your Mortgage
Your credit score can make a huge difference when it comes to how much home you can afford and how much interest you’ll need to pay.
For example, let’s say you have a $200,000 mortgage and a FICO score of 750. With this score, you can expect to pay close to $140,000 in interest over the course of a 30-year mortgage. However, if your credit score is 650, then you can expect to pay about $35,000 more over the course of 30 years.
You can use the calculator on MyFico.com to figure out what your credit score may cost you in interest. If it ends up being a lot of money, you may want to focus on raising your credit score before buying a home.
Figure Out How Much You Can Borrow
It’s important to keep in mind that the monthly payment on your first mortgage will only be one part of your monthly housing expense.
You’ll also need to pay homeowner’s insurance, property tax, and repair and maintenance costs. Before you start shopping for homes, it’s very important that you create a budget and stick to a mortgage payment you can afford.
As a general rule of thumb, you don’t want your monthly house payment to be more than 28% of your pre-tax income. Additionally, your total debt, including your mortgage payment, should be no more than 36% of your pre-tax income.
Track Mortgage Rates
A lower mortgage rate can translate to big savings on your home loan.
You shouldn’t go with the first rate that you’re offered, as a minor difference in rates can add up to thousands of dollars over the course of 30 years.
As long as you file your mortgage applications within a short period of time, additional inquiries won’t adversely affect your credit score.
Choose the Right Mortgage Broker
You need to take your time choosing a real estate agent, so too do you need to take your time choosing a mortgage broker. When choosing a mortgage broker, you shouldn’t automatically go with the one that offers the lowest rate.
Seeing as this is your first mortgage, you’re going to need a lender that offers exceptional service and can do a little bit of hand-holding. Therefore, make sure you take your time when searching for the right lender.
Get Pre-Approved Before You Start Shopping
While getting pre-approved isn’t necessary to start shopping for houses, it’s essentially the same thing as a full mortgage approval, without a specific place in mind.
Pre-approval can be a valuable shopping tool, and if you submit your pre-approval along with your offer, it shows sellers that you’re a serious buyer.
Are You Ready for Your First Home Mortgage?
Now that you’ve read this guide, you should be better prepared for your first home mortgage. Now, it’s time to start shopping.