For first-time homebuyers, applying for a mortgage can be one of the most intimidating and stressful things – even more stressful in many cases than finding a home to buy. However, the mortgage process isn’t too difficult to navigate, if you are armed with some basic knowledge and use a highly reputable mortgage broker.
So, here are a few mortgage tips for first-time homebuyers that will make the process a little easier.
Understand Home Ownership
When you are a first-time homebuyer, you may not know everything that goes into owning a home. Remember that as the homeowner, you will be responsible for the maintenance and upkeep of your home, all utilities, and the taxes.
So, it’s recommended to have savings on hand to cover the expenses of owning a home, and that you save a percentage of your income every year just for routine maintenance. This way, your home will be safe and beautiful, while possibly appreciating in value.
Calculate Your Mortgage Payment
Your mortgage payment is comprised of four parts, also known as the PITI. It is comprised of the Principal + Interest + Taxes + Insurance.
The first part of PITI is Principal and Interest, which is the basic mortgage payment that you will make every month. It is based on the terms of the loan, which includes the interest rate and the length of the loan.
The “T” stands for Taxes, which will probably be added to your monthly house payment. The benefit of this is that you avoid having to pay a lump sum every year.
Lastly, the “I” stands for Insurance, which is homeowners insurance. Mortgage lenders almost always require that you have insurance on your home, which will cost anywhere between 0.25-0.50 percent of your home’s value annually.
Take Your Time
Don’t be afraid to take your time when buying a home. This is a complex, challenging time and you want to know all the details before you take the leap of homeownership. Acting too quickly can really put you in a bind if you overpay for a home.
For example, by starting early you can work on your credit score, save up to make a larger down payment, and even purchase items to furnish your new home. And don’t forget, there are closing costs when buying a home, which you’ll need to pay at closing.
If possible, give yourself a year to financially prepare to buy a home, while you are also starting to work on getting pre-approved for a mortgage and shop for a home.
Apply for a Mortgage Before Shopping for a Home
While it is always fun to look at homes and dream about homeownership, buyers should talk with a mortgage lender at the very beginning of the process.
Perhaps most importantly, sellers take pre-approved buyers much more seriously. Plus, Realtors take buyers seriously when they are pre-approved. As a matter of fact, some Realtors won’t show buyers a home unless they have been pre-approved.
Furthermore, you probably won’t know how much you can afford to pay for a home until you have been pre-approved. So, talking to your mortgage broker is part of the process of preparing to shop for a home.
Related: 5 Tips for First-Time Homebuyers
Explore Your Mortgage Options
There are plenty of mortgage options, especially for first-time homebuyers. You could save thousands on buying a home by doing some research and working with your mortgage broker early in the homebuying process.
Furthermore, it’s helpful to understand the difference between different types of mortgages, and which could benefit you the most. Some mortgages feature a zero down payment, some have low down payments, and some require mortgage protection insurance. You can also get mortgages that include the cost of renovation, and you may qualify for a mortgage that lets you pay the down payment and closing cost with sweat equity.
By working with your mortgage broker early in the homebuying process, you’ll have a chance to choose the best mortgage for your situation, and save as much money as possible.
Marimark Mortgage is based in Tampa, Florida and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing, and help clients with HARP refinancing to lower their monthly mortgage payments.