You’ve carefully weighed the pros and cons of buying a house vs. renting. You’ve watched HGTV nonstop. You’ve even planned your perfect modern farmhouse look. Now, it’s time to figure out how to pay for your home. Here, we share seven tips first-time home buyers need to know.
1. Get pre-qualified before buying a home.
We know–looking at homes is the fun part! We love an open house as much as the next person.
But before you get there, start with your lender. Your lender can answer any questions you have. Most importantly, at The Bank of Missouri, your lender can provide a pre-qualification at no cost to you.
A pre-qualification is an estimate of how much you can borrow. You supply the bank with some basic information about your finances and the lender will give you an idea of the size mortgage you could qualify for. A pre-qualification is provided using the documentation you give to the bank and does not include additional information, like an analysis of your credit report. This means pre-qualifications are usually quick and easy.
Having a pre-qualification helps you start thinking about what size mortgage you can afford and what your payments might look like.
2. Continue to make all your payments in a timely manner.
Keep paying your rent and make all of your other payments on time. You will need your credit score to be at its best because higher credit scores generally translate to lower interest rates. And worse, if your credit score dips too low, you may have trouble getting a home loan.
Payment history is just one part of your credit score. Learn more about what makes up your credit score.
3. Consider how taking on other “new” debt may affect your ability to repay the loan.
If you’re not budgeting, now is the time to start. You are about to make what is probably the largest purchase of your life so far. Be sure to take a look at your current expenses and debt, as well as any new expenses or debt you may take on in the future. You will want to make sure you can afford your home five years from now, as much as today.
And remember that pre-qualification we suggested you get in tip #1? That doesn’t always equate to what you can actually afford. A pre-qualification looks at your income and your debt, like car payments or student loans. It does NOT take into account discretionary spending. Do you eat out for lunch every day or ‘brown bag’ it? Do you take big vacations every year or have minimal entertainment expenses? You need more than a pre-qualification to decide how much house you can afford; you need a budget.
4. Consider how an employment change may affect your ability to repay the loan.
After you have determined what your monthly payment might look like (hint: visit our website for loan calculators), you need to think about how changes might impact your ability to make payments. What would happen if you lost your job? Or you took a job with a lower salary? Think about what size emergency fund you need and if you’re leaving a little wiggle room in your budget.
5. Stay in contact with your mortgage lender.
Our mortgage lenders specialize in home loans and can be a great source of information for first-time home buyers.
Be sure to stay in touch with your lender along the way. It’s what we’re here for! Good communication can help get your loan to the finish line as soon as possible.
6. Provide requested documentation in a timely manner.
Is there a lot of paperwork when you buy a house? Sure, you can expect a few documents to pass back and forth. Your mortgage lender will help keep you informed and keep things moving along smoothly. The faster you provide requested documentation, the faster you can walk through the doors to your first home.
7. Finalize homeowners’ insurance 10 days prior to closing.
Homeowners’ insurance is protection you don’t want to risk living without. And, if you’re taking out a loan, you probably won’t have a choice. Lenders generally require you to have a policy before you finalize your loan.
Work with an insurance expert to determine the right kind of policy for you and the amount of coverage you’ll need. Be sure to give yourself enough time to carefully select your coverage and have it in place 10 days prior to your loan closing date.
Have questions? Our experienced lenders are ready to help guide you through the process.
Visit https://www.bankofmissouri.com/home-loans/ or give us a call today.