Our 1st Time Homebuyer Tips

Finally time to buy a home? Get educated here first!

It's time for the next chapter, but now what?

It's a big deal, but we know this process can be fun and exciting too!
First things first. It's time to clean up the credit.

Your credit score is not the only factor in getting approved for a mortgage, but it is an important part of determining what you will be able to qualify for. Here’s how to make sure your score is on point:

Know your credit score before meeting with a lender. It is important to know where you stand before applying for a loan. You can get a free credit report once a year online by visiting annualcreditreport.com.

Verify that your credit report is accurate. Identify any errors and dispute them with the credit bureau as soon as possible. Any unresolved disputes may lower your credit score and delay your loan approval.

Pay down high credit balances. Chipping away at those bills may positively affect your credit score and help you get approved with a better interest rate.

Set up payment plans on any delinquent credit lines. Call your creditors and work out a budget-friendly plan that won’t harshly affect your debt-to-income ratio.

Get familiar with mortgage terminology.

Understanding mortgage terms prior to meeting with your licensed Arrowhead Home Loans officer can make everything easier to understand. We promise, they may sound like confusing terms, but in the end we can help make them easy to understand.

Now it's time to get the budget in order.

When you’re trying to figure out how much house you can afford, start with your income. Then be sure to include all of your expenses, including:

• Monthly bills (utility bills, loans, etc.)
• Living costs (food, entertainment, etc.)
• Estimated property taxes
• Estimated homeowner's insurance
• Estimated private mortgage insurance
• Potential homeowners association fees

In addition to these recurring costs, remember to factor in one-time costs during the buying process, including closing costs and your down payment. Need help? We can definitely help you in the right direction.

Calculate your Debt-to Income Ratio (DTI).

Traditionally, lenders will not qualify you for a mortgage unless your DTI is less than 40%. You can change your debt-to-income ratio by either increasing your monthly income or decreasing the amount of debt you carry each month. The second option is usually easier than the first, so pay down as many open credit accounts as you can.

Time to choose your lender, just don't do it based on rate.

Everyone wants to save money. When it comes to mortgages, saving a bit on your interest rate is great! But it isn’t as important as working with a reputable, trustworthy company that offers a wide variety of loan products and will work with you to get the best financing for your situation.

Get pre-approved and not just pre-qualified.

You’re not fully ready to start looking at homes until you understand the difference between pre-qualification and pre-approval.

Pre-qualification determines your ability to repay a loan based on the information you provide.
Pre-approval is a written commitment from a lender to extend a mortgage to you for a specific amount and time period. This involves an analysis of your financial status and credit history.

With a pre-approval, you’ll be able to set your budget, negotiate confidently and close faster. Realtors and sellers will often take your offer more seriously if you get pre-approved prior to house shopping. It lets them know you are ready to make a deal!

Choose a real estate agent carefully, and avoid dual agents.

Make sure you work with a real estate agent you can trust, who is experienced, and who has your best interests at heart. It’s always a good idea to get referrals from family and friends who’ve been through the home buying process. You’ll also want to avoid a dual agent who represents both the buyer and seller in a transaction. This is often a conflict of interest, because it’s possible that the agent will not negotiate in the buyer’s best interest in order to increase the commission. If you do use a dual agent, make sure it’s someone you trust completely.

Don't make financial changes during the loan process.

All aspects of your income and finances are on the table when applying for a loan. Don’t make any major purchases like a car, large appliances or furniture, and don’t move untraceable money into or around your accounts. Also avoid changing employers during the home loan process. Steady employment will likely be a factor in determining what loan you qualify for.

Get all the details in writing.

During the purchase process, a seller may make a variety of verbal guarantees. For example, the seller may promise to fix the roof before you move in or provide all of the kitchen appliances. Make sure this information is included in writing in any agreements you sign. If an agreement is not explicitly written in a contract, the seller is not obligated to abide by it. This also includes all of the details of your loan. Make sure the amount, payments, rate lock, and other details are clearly stated in writing in a signed document.