Buying a home and applying for a first home loan is exciting, but it can seem complicated. These tips for first time home buyers are useful for finding the best deal on a home loan and avoiding surprises in a lender's office or at the closing table.
- Shop for a mortgage before shopping for a home: This strategy not only helps you avoid the stress of finding a mortgage after making an offer on a home, but it also establishes a price range for homes based on how much you can qualify to borrow.
- Request and compare multiple mortgage quotes: First-time home buyers often focus on mortgage rates alone. The rates typically advertised by mortgage lenders are their rock-bottom lowest rates that are available to borrowers with plenty of assets and a pristine credit history. Mortgage lenders may quote a very low rate, but FICO encourages mortgage shoppers to pay attention to lender fees and discount points. High fees and discount points can offset savings indicated by comparing mortgage rates alone.
- Make a list of questions about each mortgage quote: Listening and paying close attention to how prospective lenders address questions and concerns can prevent problems. Home buyers should avoid lenders that seem too busy or unconcerned with their questions. Getting the best loan depends on good communication between mortgage lenders and their customers.
- Don't be afraid to negotiate: The Federal Trade Commission encourages consumers to negotiate with lenders for getting the best loan.
- Consider short and long term goals: Factors including career, retirement plans, and changes in family and required home size can influence mortgage choices. They also affect the way you'd find your best deal on a first home loan. There are many types of mortgages available; each is best-suited to specific needs and goals. While life changes do happen in spite of needs and goals, having a general idea of present needs and future plans can help with selecting the right home loan.
- Get pre-approved for a mortgage: This can gain a seller's attention if there are multiple offers on a desirable home. A mortgage pre-approval letter advises home sellers that buyers are approved for a mortgage of specific amount for a specified time period. Sellers can accept a purchase offer with mortgage pre-approval with reasonable assurance that the sale won't fall through due to mortgage credit issues. An offer with a pre-approved mortgage can allow for faster closing, which benefits both buyers and sellers.
- Don't forget the most important tools: A graduate degree in finance isn't needed to find the best mortgage deal. Common sense and intuition are valuable tools that can help mortgage shoppers avoid mistakes. If questions or concerns are dismissed, or a loan officer says not to worry about completing or signing mortgage documents, it's time to find another lender.
Buying a home is the largest financial transaction for most families, and it's important to get it right. Mortgage lenders and their clients rely on good communication to find the best loan for each situation. Select a mortgage only after exploring all aspects of mortgage offers.