Becoming a first-time homeowner is exciting – but it can also be disconcerting and overwhelming – a little bit like you’re trying to board a plane while it’s taxiing down the runway.
Until then, consider these five important tips from some of our Millennial lending experts at loanDepot who can show you how the typical mortgage process works, help you gather necessary information, and move you forward to the best part of the process: homeownership.
1. Crunch the numbers: know how much house you can afford
Online housing calculators can help you get a sense of what you can afford (and how far that goes in your area) without seriously over-leveraging yourself and becoming house-poor. Being in a beautiful home where you can’t afford the monthly utility bills is nobody’s goal for a home purchase, but it can happen if you’re not committed to an appropriate-size house in your area of choice.
2. Fine tune your finances for the mortgage process
A home purchase is one of the biggest decisions you can make in your life. Reviewing your finances before they’re placed under a microscope can help. By doing so, you avoid being crushed if your current financial situation doesn’t backup the dream home you have your eye on. So, to ensure you’re financially ready to take the plunge, you’ll need good credit, funds to close, and a verifiable income.
3. Understand which mortgage type is best for you
From fixed to adjustable rates, there are differing options that are priced differently – and can extend out your payment term (i.e., 15 years versus 30 or 40). Getting familiar with how mortgage rates work and the different kinds of loans available to you will help determine which option works best for you. And, keep in mind that first-time homebuyers may qualify for additional programs or assistance; just make sure to check with your lender so you don’t leave money on the table.
4. Work with an expert who understands your needs
As a Millennial first-time homebuyer, you have particular needs – from communication preferences to timing – that may be different from what some lenders are used to. Make sure you’re comfortable working with your lender. After all, you’ll be working closely together to collect and share the detailed information needed to complete your application.
5. Know the lingo
“Pre-approved” is different from “pre-qualified.” Why is it important to know the difference? A bank’s prequalification letter certifies that your credit is in good shape and that your earnings are sufficient for a home purchase at a certain value. A mortgage pre-approval is more thorough and considers more factors within your overall financial picture for a detailed and concrete evaluation.
Published Aug. 17, 2017