Buying your first home is an exciting time, and if you’re coming off of being a renter then there are some big changes ahead. A new era of your life is going to begin with your new purchase. At times it can seem a little frightening, certainly exciting, and often times a little overwhelming, but rest assured that you’re making the right decision!
With so much to consider before the proverbial moving truck arrives, are you ready for a new chapter?
The First Steps
Depending on where you are in your buying process, these early steps may have already been taken care of. However, if you’re just getting started writing this new chapter in your life, then you’ll find these tips very valuable.
The first steps of buying your first home should be to secure financing and at a bare minimum get pre-qualified. This may seem like something that you would save for last as most material transactions take place once the goods are in hand, but this isn’t most transactions, it’s a home purchase.
Getting pre-qualified for a mortgage will be a great barometer on where you are in your home search. It will let you know exactly what you can afford to buy, what you can afford in monthly payments, and will give you a place to start shopping for a home.
Interest Rates and Credit Scores
In most circumstances, interest rates and credit scores go hand-in-hand. The interest rate is essentially what you pay your lender for the convenience of loaning you money to buy your home. Today, interest rates are hovering around all-time lows and are expected to remain there for the foreseeable future; however, changes in monetary policy and to the markets can have drastic changes on interest rates.
Your credit score basically tells a lender how worthy you are of getting credit by measuring your performance in past credit situations, and the interest rate you get is also closely tied to that score. There are not hard and fast rules for what credit score you need in order to get a mortgage, but the better your credit score, the better your interest rate and generally the higher your credit limit.
What About Down Payments?
You may be looking at your bank account wondering one of two things: 1) I can’t afford a down payment! or 2) How much down payment can I really afford?
Both questions are common, but not unreasonable. In all likelihood, you can afford a down payment and it won’t cost you your life savings to do so. For most conventional loans, a 5% down payment is required at closing; however, due to the market crash of 2008, virtually all loans are backed by private mortgage insurance (PMI) until 20% equity is paid back into the purchase.
All of that to say, if your home purchase is on a short time budget, then you can always get away with the rule of thumb 5%; however, more down payment means less interest in the long run. Many homeowners will be comfortable putting down anywhere from 5-10%, but some may choose to save on the PMI and put down far more on their home.
Get Your Questions Answered!
Writing this new chapter of your life comes with a lot of questions and we at Tidewater Mortgage Services Inc. completely understand.
Get in touch today with one of our expert loan officers and get all of your mortgage-related questions answered. If you don’t know where else to start, then apply online today for a line of credit and get pre-qualification in as little as 24 hours. From there, you can use your pre-qualification to start finding the perfect home for you and your family!