While there’s no question that purchasing your first home can be exciting, the homebuying experience can also prove tremendously stressful on even the most well-prepared buyers. In fact, it’s hardly unusual for first-time buyers to inadvertently sabotage their own chances for mortgage loan approval. So, if you’re hoping to transition from renter to homeowner in the near future, it’s in your best interest to get all your ducks in a row – and the following tips can help you do just that.
Don’t Apply for Mortgages You Can’t Comfortably Afford
To call a mortgage a vitally important financial commitment would be an understatement. In fact, for many homeowners, mortgages represent the longest-term financial commitments they’ll ever make. That being the case, it’s in every first-time homebuyer’s best interest to consider whether they want to potentially spend decades paying off a mortgage they can’t comfortably afford.
When it comes to home-buying, many of us adopt a “go big or go home” mindset. The way we figure it, if we can’t have our dream home, what’s the point of purchasing a residence in the first place? While this rationale is somewhat understandable, it’s important to remember that home prices in many areas are on the rise – and, like many other things in life, buying a home often requires tremendous compromise.
Even if you’re approved for a mortgage loan for your dream home, the monthly payments stand to bleed your finances dry, thus preventing you from building your savings and leaving you with very little money to spend on essentials and leisure pursuits. While you may be residing in your dream home, your overall quality of life is likely to take a huge downturn. Furthermore, missing mortgage payments can cause considerable damage to your credit and eventually even result in foreclosure. So, before applying for a mortgage loan, take care to carefully consider the terms of the loan and confirm that the monthly payments will leave you with sufficient resources for other areas of your life.
Make a Large Down Payment
It’s in the best interest of most homebuyers to make the largest possible down payment on their respective residences. The larger the down payment, the lower your monthly mortgage payments are likely to be. While the desire to avoid spending large sums of money makes sense, this is one instance in which frugality can present a considerable inconvenience. When it comes to down payments, a short-term financial sacrifice can result in more manageable monthly payments and enable you to pay off your mortgage in a more expedient manner.
Committing to make a large down payment also stands to increase your chances of being approved for a mortgage loan. The more money you’re willing to put down, the safer a risk lenders are likely to view you as. A large down payment represents financial stability and steady income, both of which are qualities that lenders find extremely attractive.
Get Outstanding Debt Under Control
Applying for a mortgage loan while mired in massive debt is likely to end in disappointment. With this in mind, make sure to get any outstanding debt under control before you start submitting home loan applications. Getting a handle on high-interest debt is particularly important, so regard paying off your credit cards as a priority. You should also avoid accumulating more debt – i.e., making large purchases on credit – throughout the loan application process.
Even after your outstanding debt has been paid off, give your credit score some time to recover before proceeding to submit loan applications. No matter how eager you are to own a home, a little bit of patience on your end can prove highly beneficial in this endeavor. When it comes to first time home buyer advice, few tidbits are more beneficial than taking care of outstanding debt.
Purchasing your first home is cause for celebration. In addition to representing an important personal milestone, the transition from renter to owner often marks the beginning of a whole new phase of adulthood. However, you’d be hard-pressed to find homebuyers for whom the process is smooth sailing. As exciting as buying your first home can be, the experience can also facilitate immense frustration. In the interest of keeping stress to minimum, first-time homebuyers should put the previously discussed pointers to good use.