What to do when buying my first home

Buying a home for the first time can be a daunting process, especially in today’s market where home inventory is low and home values ​​are high.

If you are looking for a new home – and a mortgage to finance it with – it is important to know how to position yourself as a good candidate for the loan. It is also essential to buy a home that works for you financially. Here are some tips from Emanuel Santa-Donato, Vice President, Capital Markets and Lead Acquisition at Better, to help you navigate your first home search and mortgage application.

1. Set a budget and stick to it

Buying an overpriced home can leave you with a huge mortgage payment that you might have a hard time keeping up with. This is why it is important to establish a budget before your research.

As Santa-Donato explains, “At the end of the day, you’re the one paying the bills, so you want to make sure you’re successful. Many homeowners are pressured to spend more than their budget, which is a headache down the road. “

To guide your search, Santa-Donato recommends that you determine how much you can afford to spend on all of your homeownership fees, comprising:

  • Property taxes
  • Home insurance
  • Maintenance
  • Utilities

You can use a mortgage calculator to see what your principal and interest payments will look like based on your loan amount, down payment, and interest rate, then factor those other numbers into your specific budget.

2. Increase your credit score

Mortgage lenders love Better tend to favor applicants who arrive with good credit. After all, your credit score indicates how trustworthy you are, and lenders tend to reward strong borrowers with a low interest rate. rates on their home loans.

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One of the best ways to increase your credit score is to pay all incoming bills on time. Also, be sure to check your credit report for errors and correct any mistakes that could cause a lender to deny you a loan or charge you a higher interest rate than you want. If, for example, there’s an overdue debt on your credit report that you never accrued, that’s the kind of thing you’ll want to sort out immediately.

3. Repay part of the existing debt

While lenders take credit scores into account when approving mortgage applicants, they also focus on existing debt. This is where your debt to income ratio This ratio measures your existing debt to your income, and the higher it is, the more it serves as a red flag. Paying off debt, on the other hand, can help lower that ratio into more favorable territory and give the lender more confidence in your ability to meet your mortgage payments.

4. Look for mortgage pre-approval

In today’s real estate market, get pre-approved for a mortgage is especially important because it sends the message to sellers that you are a serious buyer with the means to respond to an offer. In fact, if you have an argument with a competing buyer for the same home and only you have a pre-approval letter, it gives you a serious advantage.

Getting pre-approved for a mortgage can also help you narrow down your home search. As Santa-Donato explains, “While your budget helps you figure out how much house you can afford, a pre-approval gives you a solid starting point and the ability to be more nimble to compete in this vibrant real estate market. “

It’s not easy to be a first time home buyer, especially in a real estate market like the one we have today. But if you follow these tips, you will have a better chance not only of finding the right home, but also of catching a affordable mortgage to accompany it.

We strongly believe in the Golden Rule, which is why the editorial opinions are our own and have not been previously reviewed, endorsed or endorsed by the advertisers included. The Ascent does not cover all the offers on the market. Editorial content for The Ascent is separate from editorial content for The Motley Fool and is created by a different team of analysts. The Motley Fool has adisclosure policy.

The Motley Fool is a USA TODAY content partner providing financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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