The entire home buying process can be overwhelming, especially for a first-time buyer. However, it doesn’t have to be complicated.
Below we provide you with tips on what you should and shouldn’t do when buying your first home.
Do check your credit score beforehand.
According to a recent study by Consumer Reports investigation, more than one-third of Americans found at least one error on their credit report – with 29% found personal information errors, and 11% found account information errors.
Errors in your credit score can lead to mortgage lenders giving you higher interest rates. If you see discrepancies on your credit report, dispute them immediately! Also, if you have a low credit score, improve it first before starting the home buying process to qualify for a lower rate.
Tip: You can get a free copy of your credit report at the Annual Credit Report
Do get pre-approved for a mortgage loan.
Getting pre-approved first will let you understand how much you can afford. This way, you won’t waste time looking at houses you can’t afford.
Please note that pre-approved is different than getting prequalified. Know the difference between Mortgage Pre-Qualification vs. Pre-Approval
Do get quotes from multiple mortgage lenders.
Even if your initial rate quote seems like an excellent option, it might not be the best deal.
Interest rates can differ significantly from one mortgage broker or lender to another. Do your research, explore your lending options, and talk with numerous lenders to make a more detailed comparison of each of their interest rates, closing costs, and lender fees.
Don’t open new credit or close existing credit accounts.
Mortgage lenders review your credit score during pre-approval—and before accepting your loan application.
In the meantime, you should maintain your credit by avoiding opening new credit or closing existing lines at least one year before applying for a home loan.
It would also be best to avoid making large purchases as this new debt may lower your credit score. However, you have to keep your account active because credit card companies can close your account if it’s inactive – which can also negatively affect your credit score.
Don’t change jobs before getting a mortgage.
As part of the loan process, lenders will review your income information for two years to guarantee that you earn enough to support the mortgage you are applying for. Also, mortgage providers look into the number of years you have worked for the company and how likely your employment will continue.
With that said, changing your career can be challenging to get approved for a mortgage.
However, if you’ve gone from being a contractor to a full-time role, your new job may help your mortgage application.