Lee Morof's Real Estate Blog

It is exciting to purchase a house for the first time, but this is also a major financial decision. Therefore, potential homebuyers need to make sure they are prepared. What do potential homeowners need to know about purchasing a home for the first time? Learn more about this process below. 

Ask For Help From A Real Estate Agent

First-time home buyers always need to ask for help from a real estate agent. A real estate agent can help someone identify potential issues with a home that might have otherwise been overlooked. A real estate agent can also make sure potential home buyers do not overpay for a home. 

Always Get A Pre-Approval Letter

Potential home buyers also need to get a pre-approval letter from a lender. This is a letter stating that a potential home buyer has been approved for a specific loan amount for that specific property. A pre-approval letter will help someone’s offer appear more competitive, particularly if they are going up against a cash offer. This makes the seller more confident that the offer is not going to fall through on financing. 

Do Not Skip The Inspection

Some home buyers are tempted to skip the inspection because this costs more money. It is critical to get a home inspection done so that everyone is aware of the potential issues with the home. If there is a major repair identified, potential home buyers may ask to have this repaired before purchasing the home. 

Pay Down Other Debt

First-time homebuyers need to pay down as much of their debt as possible before applying for a home loan. This could make it easier to receive financing, and potential homeowners might receive a lower interest rate. Examples of other forms of debt include credit card debt, student loans, and car loans. 

Get The Money In Order

Of course, potential homeowners need to make sure they arrange their money prior to closing, but it is also important to get a down payment put together before looking for a home. Many sellers will ask for proof of funds before accepting an offer. Arranging funds prior to the search process can make this much smoother. This can also help first-time homebuyers compete with cash offers. 

Carrying debt is a common problem that people have. Some of the most common types of debt include student loans, credit cards, and motor vehicles. When you are interested in buying a new home, you often think about whether or not your debt is going to hurt your chances of qualifying for a new mortgage.

Fortunately, you may still get a new home with that debt. There are several factors that may determine whether or not you qualify.

Your Debt to Income Ratio

The debt to income ratio is a major factor that the mortgage lender is going to consider when deciding whether or not you will qualify for a new mortgage. In general, the magic number is 43 percent. If your debt exceeds 43 percent of your total income, the lender will have a hard time giving you that new mortgage.

For example, if you make $5,000 per month, you will want to have less than $2,150 in monthly debt payments. To make yourself a more attractive candidate for a mortgage, try paying off some of your existing debt.

Taking A Look At The Credit Score

The lender is also going to consider your credit score. The higher your credit score is, the more likely the lender will reward you with a loan. In order to keep your credit score high, make sure you manage your debt well.

Making your debt payments on time will keep your credit score high. Missing debt payments will lower your score. Manage your existing debt well and you will have a better chance of qualifying for a mortgage.

Making Sure You Can Handle A Mortgage

Finally, the lender is also going to take a look at whether you can take on the responsibilities of owning a home. The monthly mortgage payment isn’t the only expense you will be taking on. Some of the other issues you will have to handle include property taxes, maintenance costs, and homeowners’ insurance. 

The bank or credit union will want to ensure you can handle these costs. To make these expenses easier to bear, it might be a good idea to pay off some of that existing debt.

Investing In A New Mortgage

Looking for a new home is exciting. You can purchase a house with existing debt as long as it is minimized and managed well. Think about these factors before investing in a mortgage.

If you are in the market for a new home or interested in listing your current property, be sure to consult with your trusted real estate professional.