8 Important First Time Mortgage Tips Every New Homebuyer Should Know

For new homeowners, a first-time mortgage can be an intimidating prospect.

Let’s face it, the paperwork that goes along with a mortgage is extensive at best. You’ve probably read shorter novels. It also leaves you with a lot of questions.

Were you supposed to read all of it? Were you supposed to understand the parts you did read? What happens if you fill something out wrong?

With all those questions running through your mind, it’s no wonder mortgages and homebuying feels so adult, even over our heads.

However, we’re here to ease the pain a little bit. Keep reading because we’ve thrown together 8 important first-time mortgage tips every new homeowner needs to read!

First-Time Mortgage Tips for People Like You

Just because we started this article talking about the hefty weight of a first-time mortgage, it doesn’t mean we think it’s a bad thing!

Buying a home is a phenomenal experience to have by yourself or with a family. Owning a home is a much different feeling than buying one.

You don’t have a landlord to worry about. You can put up whatever decorations you want, renovate as you please, and tear down where you see fit! Additionally, every mortgage payment you make is an investment, rather than just a rent check you’ll never see a return on!

Now that we’ve built some of the charms back into homeownership, let’s talk about some first-time mortgage tips to help you on your way!

  1. Downpayments Are Important, but Not Always Required

First, a downpayment is typically suggested but isn’t necessarily required, depending on your lender, type of loan, etc.

For example, special loans, such as VA loans can sometimes qualify you for a loan with 0% down. However, this does mean that your house payment each month will be higher, as well as your interest rate.

Other loans, such as FHA loans require very small down payments. Asking for as little as 3% upfront, FHA loans make it much easier for people to acquire mortgages.

Alternatively, the suggested down payment is typically 20%. However, a 20% down payment on a $300,000 home is $60,000. While many people can afford the monthly payments attached to a $300,000 home, not many have $60k to throw at a down payment.

  1. Know Your Options

When you’re looking for a first-time mortgage, it’s important that you know what’s available to you.

There are conventional mortgages, FHA loans, VA loans, USDA loans, and more!

Make sure you talk to the right lender who can break down your options for you and help you find the right solution. For example, a Portland Mortgage Lender called the Tammi Lindley Team possesses a combined experience that helps people with the most complicated of situations!

Find what’s right for you and your financial situation and make a decision you won’t regret later.

  1. Know Your Financial Situation

Speaking of financial situations, do you know what your’s is?

If you don’t already know your credit score, your debt to income ratio, and what you’re approved for (in terms of a mortgage), then you need to figure it out. These important factors determine your future home and get qualified for a first-time mortgage.

In some scenarios, people find out they can’t get approved for anything until they make some serious financial changes. These changes could include paying off credit cards or other debts, selling cars, or increasing their income. Buying a house isn’t always easy.

You have to understand, however, that the banks are trying to protect their investment. They don’t want to give you a mortgage you can’t afford to pay or they would be the ones losing money!

  1. Don’t Get in Over Your Head

We recommend getting pre-approved for a first-time mortgage, even if you end up using a different lender. Your approval amount may vary slightly, but it’s a good idea to know what you’ve got going into house-hunting. You don’t want to spend a bunch of time looking at $350,000 houses only to find out you’re only approved for $250,000!

Lenders take a lot of factors into account when determining your approval amount.

However, just because you’re approved for ‘x’ amount, it doesn’t mean you should find a house for that much. We can’t stress that enough! You must think about how much stress a mortgage payment will put on your budget.

You also need to consider any extra payments involved in buying a house, unexpected financial emergencies, hard times, etc.

We highly recommend not maxing out your first-time mortgage by buying as much house as possible.

  1. Know All of the Costs Associated with Buying a Home

As we just suggested, buying a home has many costs associated with it outside of just the mortgage.

First, you have a downpayment, anywhere from 0% to 20% or more depending on your financial situation. Second, you have closing costs and realtor fees. Closing costs typically cost 2-3% of the house cost and realtors usually cost 5-6% (split).

Next, you need to consider property taxes, moving expenses, furnishing costs, the appraisal fee, etc.

  1. Understand Any Homeowner’s Association Policies

Some neighborhoods fall within a homeowner’s association. These organizations exist mainly to protect the quality of their neighborhoods (and to make money).

Some homeowner’s associations are pretty easy-going and you’ll only ever hear from them if you’re letting your property become a junkyard or are throwing raging parties. However, some will jump down your throat the second your grass gets too long or your dog barks more than three times in a row.

Additionally, some homeowner’s associations are quite costly, typically in the range of $200 to $300 a month.

  1. Consider the Eventuality of Reselling the Home

While it’s probably not on your mind at the time of buying a home for the first time or applying for a first-time mortgage, you need to consider the eventuality of selling the home.

Based on what you know about it, will it be hard to sell in the future?

  • Does it have major problems?
  • Is it the largest or smallest on the block/neighborhood?
  • What are the surrounding homes like?
  • How long was it on the market when you found it?

These questions could save you massive headaches years down the road.

  1. Try Not to Get Emotionally Involved Until Ink Is on the Contract

Finally, understand as you’re applying for a first-time mortgage that buying a home is an emotional rollercoaster, especially for a new homeowner. Deals often fall through for one reason or another.

It’s important not to get emotionally attached to homes until you’re signing the contract. All too often, new home buyers are let down by unforeseen issues with finances, documentation, etc.

However, taking the steps we’ve listed will prevent foreseeable problems with your mortgage and anything else on your end.

Good Luck

Now that you know the basics about applying for a first-time mortgage, you’re ready to get out there! Remember to get pre-approved before you get your heart set on any potential homes to make sure you can afford it!

Otherwise, keep everything we told you in mind and have fun house-hunting!

And if you need anything else on finances, mortgages, and more, check out the rest of our blog!

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