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Mortgages 101: Basics for First-Time Homebuyers

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Your Easy Guide to a Stress-Free Homebuying Experience 

If you’re looking to purchase your first home but aren’t sure where to start, we’ve got you covered! 

This helpful guide provides valuable tips to ease your homebuying woes and set you up to be a fierce first-time homeowner. We’ll take you through everything from credit score considerations to pre-approval and documentation – it’s the foundational basics for Mortgage 101.

12 Tips for First-Time Homebuyers

1. Review your credit score

The higher your credit score, the lower your interest rate, so make sure it’s in good shape before you begin your homebuying journey. And, if you need to boost it a bit before you start house shopping, here (link to credit score article) are a few easy ways to get started.

2. Calculate your budget

This is super important – set your budget before you start shopping. It can be tempting to spend every penny you’ve saved, but before you start looking for a house you should have a number in mind for what you can realistically afford for your monthly mortgage payments and initial down payment.

Use an online mortgage calculator to get a good estimate before starting your search or talk with a lender. Only you know your limits and what you’re comfortable spending on a home, so set that standard and stick to it.

3. Get pre-approved

This is probably the most crucial step in the homebuying process – especially in the current market. To make yourself stand out as a strong candidate to a homeowner looking to sell, having a pre-approval letter included in your offer shows that you’re a low-risk buyer which makes you more appealing. 

But before you settle for the first lender you find online, do your research and shop for the best interest rate you can get. That can help narrow down the right lender for you.

4. Look into first-time home buying programs

As a first-time homebuyer, you can qualify for some fantastic offers and programs to help ease you into purchasing your first property.

Discuss your options with your lender and do plenty of research to ensure you’re maximizing your benefits. These include The Home Buyer’s Plan (HBP) and The First-Time Home Buyer Incentive.

5. Hire an expert real estate agent

When you’re new to the homebuying market, having an expert in your corner can make all the difference in the world.

Your real estate agent will not only help you find your perfect home, but also help you negotiate during the offer stage and close the deal to get you across that threshold. Be sure to find someone you trust and who understands your vision for a home, and don’t be afraid to switch realtors if you’re not 100% comfortable.

6. Make a list of your home must-haves

Here’s the fun part – let’s make your house wish list! Write down the must-haves and like-to-haves for your dream home, whether that’s a big yard, a kitchen island, plenty of guest rooms, or just a cozy fireplace for two. 

Don’t hold back as you make this initial list. Once you have everything on paper, you’ll want to keep your must-haves at the top of the list and prioritize your like-to-haves to help you narrow down your top option in your home-search journey.

7. Visit homes and get familiar with the neighborhoods

Work with your realtor to schedule tours and open houses for homes you see on the market that you could see yourself living in. And when you go, take the time to do it right.

Scope out the neighborhood, explore the yard, spend time in the house to get your answers and a feel for the space. Be sure to find out when the house was built, if any appliances will be included, how old the air conditioner and water heaters are, and if any repairs have been done or need to be addressed on the property.

8. Make an offer

Once you’ve found a house that you can see as your future home, ACT FAST. Connect with your realtor to compose a competitive offer and make sure you stay within your budget. Your realtor will work directly with your lender in this step of the process, but you can always connect with your lender with any financial questions. 

If you want to make your offer even more appealing, write a brief personal letter sharing with the seller why you’re hoping to purchase their home. Pull at the heartstrings a bit if you can, then fill out the paperwork from your realtor and keep your fingers crossed for good news.

9. Schedule a home inspection

Once your offer gets accepted (yay!), you’ll be on the fast track to closing. And the first step in this process is scheduling a home inspection. Your realtor can help with this step to make sure you get a quality inspector to carefully look everything over in your soon-to-be new house. 

10. Review home appraisal

For a lender to provide you with the maximum amount you can borrow for your home loan, they’ll often require a home appraisal to assess the value of the property. A lender will typically only loan the amount the house is appraised at, as this is what’s considered the property worth. If an appraisal comes in low, you’ll need to provide the difference in cost at closing or negotiate with the seller.

11. Final walk thru

Before you close on the home, you’ll have the opportunity to walk the property one last time to make sure you haven’t missed anything that needs to be addressed prior to the transition of ownership.

Don’t be shy – it’s YOUR house and it should be in great condition for your move-in so speak up if something doesn’t look right.

12. Close on your first home

YOU DID IT! You’re at the finish line of purchasing your first-ever home. 

The closing table should be stress-free, as you should have nearly everything submitted in advance and it should just be signing a few papers and submitting the closing payment before you have the keys in hand. Once the papers are signed and the payment is accepted, congratulations! Pop the bubbly, you’re a homeowner!

Now that You Know the Basics, What’s Next? 

Now that you’re equipped with the homebuying basics, it’s time to dive deeper into the world of home mortgages and learn how you can best prepare your finances for loan pre-approval. Read the Lend Easy Guide to Preapprovals (article link here) and continue strengthening your borrower knowledge. The more you know, the more you can save, and the sooner you’ll cross the threshold of your forever home.

Homebuyer’s Handbook

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