Top Mortgage Tips For First Time Home Buyers

Buying a home for the first time can be exciting, but for many it can also be very stressful. First time home buyers are faced with the daunting prospect of answering many difficult mortgage questions like:

• How much money can I afford to pay for a new home?
• Should I rent or buy a home?
• What is the best mortgage for me?
• How can I qualify for a better mortgage?
• Should I shop around for a mortgage?
• Who should I trust with mortgage advice?
• How should I choose a mortgage lender?

A mortgage can have an enormous impact on your life for better or worse. Prospective homeowners who rely solely on the first loan officer they come across are playing a game of chance with the odds stacked against them. Prospective homeowners who invest a little time in educating themselves about mortgages and in carefully preparing themselves are more likely to be happier with their mortgage.

Taking the following steps is a great way to start:

• Get Your Financial House In Order — Establish a careful budget and stick to it. Control your spending. Make sure you make a monthly contribution to savings and build up your emergency fund. Don't forget to look for ways to increase your income at work or develop other income sources.
• Build Strong Credit — Get a copy of your credit report from at least one of the three major credit bureaus (Equifax, Experian and TransUnion). Free copies may be available without making any commitments or through a free trial subscription to a credit monitoring service. Credit monitoring services can help you manage your credit and defend against identity theft. Work with the credit bureaus to fix any inaccuracies. Continue to make your payments on time. If you can manage it comfortably while maintaining sufficient cash reserves consider paying off balances on your credit card or other revolving debt. Applying for any new debt like credit cards or car loans may work against you if you plan on applying for a mortgage soon.
• Determine How Much You Can Afford To Pay — Using a mortgage calculator can give you a general idea of what you might qualify for given your income, desired down payment, and required monthly payments on debt like car loans. Entering current mortgage interest rates will give you more realistic results. The calculator generates several different maximum home purchase prices based on common debt-to-income ratio limits for different loan types to aid you in finding a home that fits within your risk comfort level and your means. For many borrowers the maximum amount a bank might agree to lend you is more than the amount they can truly afford to pay so you should take a careful look at your budget and what you can comfortably afford to pay while making a reasonable contribution to your savings.
• Strengthen Your Weaknesses — What is holding you back from being able to buy a more expensive home? Is your income, required monthly debt payments, credit or cash on hand limiting your options? The idea here is to maximize your chances of getting approved for a mortgage for the home you need and can comfortably afford.
• Select A Trustworthy Mortgage Broker Or Lender — Start by asking friends, family, coworkers and acquaintances for recommendations. References from borrowers who have had their mortgage more than a year should be given extra weight. You can also look at mortgage lender reviews on sites like Zillow. Next talk to some of the top candidates. Consider the quality of their responses to your questions. If they are too pushy and try to scare you out of contacting competing lenders that is a warning sign you should heed.