
Buying your first home is one of the biggest, most exciting decisions you will make, but it can also be overwhelming. Understanding how the home financing process works can help alleviate the anxiety you might feel throughout. Before applying for a mortgage, here are three important factors to take into consideration as a first-time home buyer.
Evaluate Your Credit Report
- Credit score
- Payment history
- Outstanding debt
- Length of credit history
- Variety of credit: Lenders want to see that the borrower has experience using multiple sources of credit in reliable ways. For example, having a credit card plus an auto loan shows your ability to repay both installment loans and revolving debt.
If the information on your credit report meets the lender’s criteria, the loan program and interest rate that you’re eligible for will, in most cases, be determined using these factors. To make sure you are receiving the best loan terms (including interest rate and repayment options), be sure to check your credit report regularly for new items or possible errors. This can be done for free at sites like annualcreditreport.com. If your score isn’t as high as you want or need it to be, you can get some helpful information from these blogs on What is Credit? and What Makes Up a Credit Score. If you see any errors on your credit report, you may have the option to file a dispute, but it is important to consult with a mortgage advisor to make sure the timing doesn’t affect your eligibility for your potential loan.
Review Your Finances
There’s a common belief that a 20% down payment is needed to purchase a house, but there are loan programs available that require less money as a down payment. Programs like the CommunityAmerica First-Time Homebuyer loan and Conventional, USDA and FHA and VA loans offer 0% - 3.5% down payment for qualified buyers, so it’s important to discuss all of your options with a mortgage advisor to determine the right loan for you. If you are just starting the process and are simply curious about how much house you can afford, carefully review your finances and check out this handy calculator.
Budget for Additional Costs
We get it, the prep to buy a home may seem a little intimidating. At CommunityAmerica, we are here to make the homebuying process as smooth as possible as one of Kansas City’s top mortgage lenders. When you feel comfortable, meet with a mortgage advisor to start the process or ask questions. If you’re in research mode, check out our Financial Well-Being Blog for tips to building credit, budgeting, and saving, and if you want to crunch some numbers, check out our Mortgage Calculators.