For first-time homebuyers, the idea of making that first step towards your long-term future is exciting.
But, it can also be overwhelming if you’re not prepared to apply for your first mortgage.
It’s important for first-time home buyers need to do everything they can to qualify for a mortgage before they begin shopping for homes. The first step before applying for a mortgage is to understand what lenders are looking for.
Understand Mortgage Criteria
While banks used to hand out mortgages like candy, the world has since learned its lesson and has tightened up mortgage lending criteria. For first-time mortgage applicants, banks need to make sure you’re a reliable debtor. They’ll dig deep and ask a lot of questions about your personal finances and your credit history.
To set yourself up to be a successful mortgage applicant and ensure your long-term financial stability, here are some steps to take before getting your first mortgage:
1. Pay Down Debt
If you’ve got car and student loans or credit card debt, it’s important to get this total down. Banks look at your debt-to-income ratio to determine how much you can feasibly borrow. If your debt load is too high compared to your income, then you may be rejected.
2. Build a Reliable Work History
Depending on the line of work you’re in, you may need to show a lender a steady work history of at least two years. This helps lenders see not only that you’ve got a consistent income stream, but that you’re a reliable candidate as well. A checkered work history may not stack up.
3. Gather Documents
Start putting together a folder of your tax returns, income statements and bank statements. You’ll need to provide these to the lender. Show good faith and cooperation by having these items ready to go when asked.
4. Save Up Cash
In addition to a down payment, make sure you have cash saved to cover your home insurance, property taxes and closing costs. If you received a large sum of cash from your parents for the down payment, the lender will also want a letter from your family documenting that the money was given to you.
Banks also want to be sure that you have enough savings to cover mortgage payments and other debt loads should you lose your job, become ill or fall victim to any of life’s other surprising twists.
Buying Your First House
If you follow these steps, you can increase your chances of getting preapproved for a mortgage, which brings you one step closer to purchasing your first home.
After doing your homework and you’re ready to start looking at the housing market, we will be here ready to work hard for you. As real estate experts in the Central Florida area, our agents are here to work with first-time homebuyers to help them make their biggest investment yet. Contact The Realty Medics for all your home buying needs.