Home Finance Tips for First Time Buyers

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When you are looking for your first home, it may seem like there are a lot of things that you need to get in order. One of the biggest is to find a lender who will help get you into the home of your dreams.

Many potential buyers are excited to get into the market and find the perfect home to call all their own. 

Financing your dream home as a first-time buyer can be daunting, but there are a few financial tips that you can use to make this a little bit easier, including:

Work on Your Finances and Credit

All first-time homebuyers need to take some time to work on their credit and their finances. If you have many debts to deal with, you will need to take the time to work through them as much as possible before you get started.

The lower your debt to income ratio when you talk to a lender, the easier it is to get the home you want. 

If there are a few debts that are smaller than you could pay off before you even start looking for a loan, that will make a big difference.

Try to pay those off to save even a few dollars on that debt to income ratio that you have.

This could help increase your chances of getting the pre-approval that you need and may help you afford a more expensive home. 

Then it is time to work on your credit score.

Your lender is going to pull your credit score to see how responsible you have been with your money in the past.

This is a big determinant of whether you will get the loan or not.

You need to get your credit score as high as possible before applying for a loan 

Take the time to pull your credit report and take a look at what is on there.

See if there is anything you can fix up or do to improve the credit score and make it look better overall.

This will ensure that you can raise that score and get a better rate on your mortgage, saving you a lot of money over the term of your loan. 

Shop Around for Lenders

Always take the time to shop around for lenders. The first lender you speak with may not be able to offer you the best deal out there or they may be limited on the types of mortgages they can provide. Checking out at least three, but preferably more, mortgage lenders at a time will make a difference and can help you see which one has the best terms. 

There are a few things that you should look for in a lender. First, check out what interest rates they will offer you for working with them. You may be surprised by how much difference there is between lenders you talk with. You should also compare closing costs and other fees to see which one will save you the most money. 

Take the time to compare the mortgage options that the lender can provide. If you are a veteran, you may want to consider a VA home loan that is more affordable. There are also several first-time homebuyer mortgages and programs like USDA and FHA that you may qualify for. Talk to the lender to see which options they have available for you. 

Only Choose a Home You Can Afford

It is easy to get swept up in the market and start looking at homes that are more expensive than you can afford.

But you need to take a good hard look at your finances and determine how much you can afford. 

Think about the price of the home you are in the market for. You should not just think about the mortgage payment each month.

Think about your insurance, utility payments, maintenance costs, and property taxes at the same time and compare them to your current income.

What you can afford may not be as high as the mortgage calculators online tell you. 

This is why it is so important to discuss your purchase with a lender ahead of time.

They can take into account your income, your debts, and more to help you see the maximum mortgage you would qualify for.

You can then use that information to decide if you will stay at that price or go lower before shopping for your dream home. 

Look for No or Low Down Payment Options

Many home buyers worry that they will not be able to get a home loan because they can’t save up the down payment that they need.

Traditional advice tells them that they need to come up with 20% down before they ever take a look at any homes.

With rising home prices around the country, that may seem like an impossible dream. 

However, if you are a first-time buyer, you may not need to come up with the full 20% to get into a home.

Many home loan programs require a lower down payment, including those for 3% and 5%, and even some that require no down payment at all.

These can make homeownership possible for so many people.

Most of these loan programs will have certain requirements that you must meet to qualify including income guidelines, being a first-time homebuyer, and certain credit scores.

Research some of the lenders who offer this and decide if this is a great option for you to save money when purchasing a home. 

Getting Your Finances for Your New Home

Buying a new home can be a big financial decision. You need to have everything in order and you want to make sure you are choosing a home that fits your needs, without losing money or spending more than you need.

Take a look at some of the tips above and see how you can improve your finances as a first-time buyer. 

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