Mortgage 101: A Guide for First-Time Homebuyers

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Buying your first home is an exciting milestone, but the mortgage process can feel overwhelming if you’re new to it. Here’s a simple guide to help you understand what to do before, during, and after getting preapproved for a home loan.

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Before Preapproval: Preparation​

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Check Your Credit Score:

• Your credit score affects your loan eligibility and interest rates. Aim for a score of 620 or higher, but the higher, the better. 

• If your score needs improvement, focus on paying down debt and correcting any errors on your credit report.

 

Save for a Down Payment:

• The standard down payment is 20%, but there are loans available with lower down payment options. However, less than 20% may require private mortgage insurance (PMI).

• Start saving early to meet this requirement.

   

Determine Your Budget:

• Calculate what you can afford by considering your monthly income, existing debt, and how much you have for a down payment.

• Use online mortgage calculators to estimate your monthly mortgage payments.

   

Gather Financial Documents:

• Lenders will require proof of income, employment history, bank statements, tax returns, and details of your current debts. Start collecting these documents early to speed up the process.​

During Preapproval: The Application Process

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Shop Around for Lenders:

• Not all lenders are the same. Compare interest rates, fees, and loan types from different lenders to find the best fit for you.

   

Submit Your Application:

• Once you’ve chosen a lender, submit your preapproval application along with the necessary financial documents. 

• The lender will review your finances and credit to determine how much they can lend you.

   

Get Preapproved:

• If approved, you’ll receive a preapproval letter stating the loan amount you qualify for. This letter shows sellers you’re serious and financially ready to buy.

   

Understand Loan Types:

•  There are different types of loans, like fixed-rate and adjustable-rate mortgages (ARM). Your lender can help you understand which one is best for your situation.

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After Preapproval: Moving Forward

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Start House Hunting:

• With your preapproval letter in hand, you can begin looking for homes within your budget. Your preapproval makes your offers more attractive to sellers.

   

Make an Offer:

• Once you find the right home, work with your real estate agent to make an offer. Your preapproval shows the seller you have the financial backing to purchase.

     

Complete the Mortgage Application:

•  Once your offer is accepted, you’ll complete the mortgage application process. The lender will order an appraisal to confirm the home’s value.

 

Secure Homeowners Insurance:

• Lenders require homeowners insurance before closing. Shop around for insurance that covers your new home adequately.

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Close on Your Home:

 

• During closing, you’ll sign the final documents and pay closing costs. Once completed, you’ll receive the keys to your new home!

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After Closing: Managing Your Mortgage

 

Set Up Payments:

• Arrange automatic payments to ensure you never miss a mortgage payment.

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By following these steps, you’ll navigate the mortgage process with confidence. Remember, each step brings you closer to homeownership!

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Ready to get pre-approved? Click the "Learn More" button to download a comprehensive guide that walks you through every detail of the lending process from A to Z. If you need a lender, don’t hesitate to reach out—we can connect you with one of our trusted partners.