Whether you’re a first-time homebuyer, or this is your next home, shopping mortgage lenders may feel like a huge hassle. Tia Marx, Real Estate Salesperson/Peak Partners Team at Keller Williams Capital District, says it doesn’t have to be. She shares some simple steps to make the process easier.
Before you begin looking at the first house, get pre-approved. There’s a difference between pre-qualified and pre-approved when purchasing a house.
A pre-qualification generally means that a lender collects some basic financial information from you to estimate how much house you can afford. A pre-approval dives into your income, tax documents and credit score and actually “pre-approves” you for a specific loan amount.
Tia says, “You’re actually going into the bank, bringing your W2s, your pay stubs, tax documents and you’re giving that all to them. It gives you a number and that amount is important because it gives a starting point, it tells us where to go, what we can look for.
“Nothing is worse than going to look at a house before you have that pre-approval and finding out that it’s not the house you can afford, but it’s your dream home. It’s just a huge letdown.”
SHOP AROUND FOR THE BEST BANK:
Not all banks are the same. Keep in mind that it’s more than just looking for the lowest interest rate. After all, you may have a relationship with that bank for 15 to 30 years, maybe even longer so it’s important to make sure you’re comfortable with the lender that’s originating your loan.
INVESTIGATE AND IMPROVE YOUR CREDIT SCORE:
First-time homebuyers should check their credit score at least 30 days before they begin the home buying process. Your credit score may go a long way towards determining your interest rate and even lower your chances of getting approved for a mortgage. So, make sure you pay off your debt, your collection items and don’t take out any new lines of credit while you’re in the process of buying a home.
“You see that truck you really want to buy; you know what … hold off on that truck it will be there when you buy your house,” Tia notes. “Don’t make any new purchases, nothing that’s going to hit your credit score. Pay off your monthly payments every month, even at the minimum. Making those every month is going to increase your credit score.”
DECIDE WHETHER YOU’LL FINANCE A 15 OR 30-YEAR MORTGAGE:
You can absolutely save using a 15-year mortgage. Interest rates for 15-year mortgages are generally lower than 30-year mortgages and you’ll wind up paying far less in interest over the life of the loan.
“On a 30-year mortgage, your interest rate may be at four-percent, and you’re paying $288 towards your principal and $688 towards your interest. So over time, you’re actually spending $145-thousand just on interest,” explains Tia. “Whereas, you go and use that 15-year mortgage, you might decrease your interest by a quarter percent, so your total payment will be $1,400 and you’re spending $800 on your actual principal and $600 on your interest. Over time it adds up to $61-thousand, instead of that $145-thousand, so it’s a huge savings.”
DON’T FORGET ABOUT HOMEOWNERS INSURANCE:
Most banks require you purchase Homeowners Insurance before closing. Homeowners Insurance covers losses and damage to your home and the assets in it.
“It’s super important because it covers anything that happens to the house. You have a tree falls onto the house; it’s going to cover that. You have a fire in your house, it’s going to cover that,” Tia says.
For a FREE, no-obligation homeowners’ insurance quote visit https://bluelineagency.com/personal-insurance/home-insurance.