The things you do leading up to your first home purchase can have a significant effect on the entire process. If you want to ensure that you have the best possible chance of success, there are a few things that you should do right away - even before you start exploring the market.
Know Your Credit Score
Every mortgage applicant knows how important their credit score is to the process, but many don't think to check what it is before they start shopping. That can lead to disappointment if you discover that your credit score is too low for a mortgage approval. The best thing you can do is to check your credit score well before you start shopping so that you can address anything that needs to be improved. In most cases, you'll need a score of at least 500 for consideration for an FHA loan, and likely higher for most other mortgage lenders.
Square Away Your Assets
In order to have the best chance at mortgage approval, you'll need to have not only enough cash on hand for the down payment, closing costs and escrow requirements, but also cash reserves. Essentially, the mortgage underwriters want to be sure that you have several months of mortgage payments, including your property taxes and home insurance, before they approve your loan application. This is a safety net to ensure that you can cover your mortgage payments in the event of a job loss or other problem.
Find a Mortgage Lender First
Before you even call a real estate agent, the first thing you should do is seek out the services of a mortgage lender. It helps to start here because the mortgage lender can pre-qualify and pre-approve you for a certain amount based upon your current financial situation. That allows you to narrow your home search to just the properties that you know you can afford, including the cost of property taxes and insurance.
The mortgage lender can look at your current monthly expenses, how those payments are predicted to change following a home purchase and the estimated monthly payments you'll have for your mortgage to help you narrow down the price range that fits your budget. This ensures that your real estate agent can focus only on homes that you can buy, which saves everybody time.
Don't let that first home purchase venture be an exercise in frustration. Instead, with these tips and the help of a mortgage lender like Commonfund Mortgage Corp, you'll be able to get just what you're looking for at a price you can afford every month.