Want to Get Approved for a Mortgage? Here’s 5 Tips for First-Time Homebuyers

Want to Get Approved for a Mortgage? Here’s 5 Tips for First-Time Homebuyers

Buying a house is a significant step into adulthood and a major financial commitment. While the cost might seem overwhelming, you are taking the time to invest in yourself, your future, and yes, possibly even your retirement. You are building something that you can use and ideally profit from, longterm. One of the best ways to set yourself up for success as a homeowner is to get a good deal on a mortgage. Follow these tips to get competitive rates that can help you maintain financial stability.

1. Come prepared to meet with your lender.

Mortgage companies will review a host of your financial documents before they approve your application. These documents will help determine aspects like interest rates and monthly payments. Review this checklist of items you need, like income statements and your additional assets.

Along with preparing financial documents for your lender to review, dress professionally for the meeting. Consider pairing a blazer with a fitted pair of ankle pants or a pencil skirt to show that you are professional and take the mortgage process seriously.

2. Estimate your mortgage costs beforehand.

The chances of getting a favorable mortgage are higher if you review your finances beforehand and develop a plan. Calculate your average income, expenses, debts, and spending limits to understand how long it should take to pay off the house. You may be able to get a lower monthly payment if you take out a long-term mortgage (like 20 or 30 years). You’ll also be able to lower your mortgage the bigger of a downpayment you put down.

Knowing what mortgage rates are common in your area and estimate how much house you can afford can prevent you from over-spending and falling into debt because of home expenses.

3. Take time to build up your credit.

If you aren’t sure you want to buy a house right now, use the next six months to a year to build up your credit score. Lenders look at your credit score when they set home interest rates (this is one of the factors, at least). A higher score means you are a lower risk, which means the interest rates can potentially be lower. You can build up your credit score by paying off your debt, making flat monthly payments to prove you are reliable, and by extending your credit history over time.

If your credit score still needs work, look for someone to co-sign the mortgage, like a parent or significant other. Their credit can boost your credibility. Remember, interest rates also very much depend on your local economy and health of the housing market.

4. Look for programs for first-time homebuyers.

Some lenders specifically work with first-time homebuyers to help them get approved for mortgages. These financial institutions are more likely to meet with you and offer favorable terms and interest rates. There are also programs to help veterans get favorable mortgage rates if you qualify.

Explore a few options available to you. There may be specific programs locally or national offers that you can take advantage of.

5. Try to get pre-approved before you make an offer.

If you are worried about qualifying for a mortgage or making competitive offers on the homes you want, consider meeting with lenders beforehand to get pre-approved. Mortgage pre-approval can last for 90 to 120 days and can expedite the buying process. If you don’t have a large downpayment or can’t buy a house with cash, this pre-approval will assure sellers that you are able to buy the home.

Pre-approval can also give you an idea of what your mortgage costs will be and what kind of property you can afford, so it’s easier for you to narrow down your search.

You don’t have to worry about your mortgage meeting and approval process if you have the right paperwork and understanding of the process. To keep learning, check out this mortgage 101 guide that covers the basics of taking out a mortgage and offers tips for getting approved.