First-Time Homebuyers: The Basics of How to Get a Mortgage

One of the most intimidating parts of buying a home is figuring out how to get a mortgage. Don’t worry, because our pros have all the basics you need to know.

Are you thinking about buying your very first home?

If so, you might be tempted to dive headfirst into the home-buying process. It’s easy to lose yourself in looking at home listings in an effort to figure out what you want out of your first home.

But before you get too carried away, you should learn how to get a mortgage. Unless you have hundreds of thousands of dollars stashed away in your bank account, you’re going to need to get a mortgage to pay for the home you buy.

Applying for and getting a mortgage isn’t particularly difficult to do if you know what you’re doing. But far too often, first-time homebuyers make the mistake of not finding out how to get a mortgage until it’s too late.

Here are the steps you should take to get access to a mortgage for your first home.

Check Your Credit Score and Improve It

When is the last time you went and checked your credit score? If it’s been a while, you should do it before you start the process of shopping around for a new home.

If your credit score is in the toilet at the moment, there aren’t going to be many lenders that will step up and give you the mortgage you need. So if you find that your credit score is too low, you should make an effort to improve it.

The last thing you want to do is find the home of your dreams and realize that your credit score is going to prevent you from purchasing it. So begin by taking a look at your credit score and then do what you can to improve it, if necessary.

Pay Off as Much of Your Debt as You Can

When you apply for a mortgage, one of the first things that lenders are going to look at (after your credit score, of course!) is how much debt you currently have on the books.

You may have student loan debt that you’re carrying around. You may also have debt tied to a vehicle. You may even have thousands of dollars worth of credit card debt.

All of this debt can make it hard for you to get a mortgage. If you can eliminate some or even all of it, you’ll put yourself in a much better position to obtain a mortgage.

See How Much Money You Can Afford to Use as a Downpayment

In order to get a mortgage, you’re going to have to put down a downpayment on a home. This downpayment will show a lender that you’re ready to make an investment into a home.

For years, most mortgage lenders required people to put down a 20 percent downpayment on homes. But that’s not always the case anymore.

Some lenders still require 20 percent. But others will accept smaller down payments if you can’t afford to pay that much.

However, it’s worth noting that you may need to get what’s called private mortgage insurance, or PMI, if you aren’t able to put down a 20 percent downpayment. PMI could cost you hundreds of dollars every month in some cases and bring your home-buying budget down.

Choose the Right Type of Mortgage

A big part of learning how to get a mortgage is learning about the different types of mortgages that are available to you. You will find a wide range of mortgages, including:

• Fixed-rate mortgages
• Adjustable-rate mortgages
• Government-insured mortgages
• FHA loans
• VA loans
• And more

As a first-time homebuyer, there is a good chance that you might qualify for a special first-time homebuyer mortgage program in your specific state. This program can give you access to the money you’ll need for a downpayment and increase your chances of getting a mortgage if you have a high enough credit score.

Whatever you do, don’t blindly start applying for a mortgage before you know which type is right for you.

Attempt to Get Pre-Approved For a Mortgage

Once you’ve worked your way through the first four steps listed here, the next thing you’ll want to do is try to get pre-approved for a mortgage. To do it, you’ll need to provide a mortgage lender with some basic info about yourself, like your income, your credit score, and more.

After you’ve done this, a lender will either tell you that they can’t pre-approve you for a mortgage at this time or pre-approve you for a certain amount of money. You don’t have to buy a home that costs that amount of money, but it’ll help you create a budget for your first home.

Apply For an Actual Mortgage Once You Find a Home

Once you’re armed with a mortgage pre-approval from a lender, you can start looking around for your first home. More often than not, people hire a real estate agent to help them do it. Your realtor can show you homes for sale in your area.

After you find something that fits within your budget, you can then apply for an actual mortgage, either through the lender that pre-approved you or through another lender.

Applying for an actual mortgage is more complicated than getting pre-approved for a mortgage. You’ll have to turn over a lot of important financial documents to a lender so that they can do their homework on you.

There will likely be a lot of back and forth discussions between you, your mortgage lender, and even your real estate agent. Stay patient and do your absolute best to provide a lender with whatever they need from you. It’ll increase your chances of getting approved for your mortgage.

As long as everything goes according to plan, you’ll be able to close on your first home within a matter of just a few weeks.

Learn How to Get a Mortgage Before Shopping For Your First Home

Going through the home-buying process for the first time can be a huge challenge. It helps to know how to get a mortgage before you get started.

When you know how to get a mortgage, you won’t get hit with any sudden surprises throughout the process. You’ll be more prepared to provide lenders with whatever it is they might need from you.

Contact us today if you have any questions about buying or selling properties.