Get a free Real Estate or Mortgage consultation this month from our Agents!
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The very first step every first-time home buyer should tackle is to figure out their finances. Buying a new home (particularly for the first time) requires a mortgage, where a lender fronts you the money and you pay it back over time. However, in order to get a mortgage, you’ll need some sort of down payment.
So how much do you need?
Ideally a down payment on a mortgage should be 20% of the home’s price to avoid added fees, but if you don’t have that much of a down payment, don’t worry. A mortgage down payment can be as low as 10%, 5%, or even 0% for certain types of mortgages
Did you forget to pay off a couple of credit cards? Unfortunately, it’ll affect your credit score.
In addition to having a down payment, a first-time home buyer will need a decent credit score. This three-digit number is a numerical summary of your credit report, a detailed document outlining how well you’ve paid off past debts like for credit cards and college student loans.
A lender will check your score and report in order to estimate the odds that you will deliver your monthly payment, too.
Before you head out home buying, you should seek pre-approval from a lender for a home loan. This is where you meet with a loan officer.
Each mortgage lender will scrutinize your financial background—such as your debt-to - income ratio and assets—and use this info to determine whether to loan you money, and what size monthly payment you can realistically afford. This will help you target homes in your price range. And that’s good, because a purchase price that’s beyond your financial reach will make you sweat your mortgage payment and puts you at risk of defaulting on your loan.
As a buyer, just keep in mind that mortgage pre-approval is different from mortgage pre-qualification. Pre-qualify, and you’re undergoing a much simpler process that can give you a ballpark figure of what you can afford to borrow, but with no promise from the lender. Getting pre-approved is more of a pain since you’ll have to provide tons of paperwork, but it’s worth the trouble since it guarantees you’re creditworthy and can truly buy a home.
Want a trusty home-buying guide by your side? Most first-timers will want a great real estate agent—specifically a buyer’s agent, who will help them find the right houses, negotiate a great real estate deal, and explain all of the nuances of home buying along the way.
The best part? The agent’s services are free to first-time home buyers (because the seller pays the sales commission). Note: There is a subtle difference between a real estate agent and a Realtor®; the latter is a member of the National Association of Realtors® and adheres to a code of ethics.
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