Recently, we shared some ideas on how you can budget, plan, and save to buy a home in Colorado Springs. So, if you have a good plan in place, an idea on where you want to live, and enough saved to finally make your move, it’s time to find the right mortgage lender for first-time homebuyers.
There are often nuances and special cases for first-time buyers. Reliable lenders understand this and can help guide your journey by finding and exploiting loans that offer government assistance, low (or no) down payments, low fees, and more.
Finding and choosing the right mortgage lender can not only give you peace of mind through what can be a stressful process, but it may just save you thousands of dollars in the long run.
Here’s what you should know when looking for a lender as a first-time homebuyer.
Know Your Credit Score
This is a big factor as lenders crunch numbers and work up potential loan terms, mostly impacting your interest rate. Essentially, your credit score tells lenders whether or not you’re likely to pay back your loan, so getting your score is step one in knowing where you stand for potential loan approvals. Most lenders use the FICO scoring model, which ranges from 300 to 850.
Look Into Assistance Programs
There are a lot of perks to help first-time homebuyers purchase a home. Discounts through partnerships with state agencies, down payment assistance programs, and help with student loans are just the beginning. Government-backed home loans make qualification much easier—you can get a USDA or VA loan with no down payment, or as little as 3.5% down with a minimum credit score through an FHA loan. Keep in mind that not all lenders offer all programs, so be sure to ask what programs and unconventional loans you might be eligible for.
Shop Around, Compare Rates
Comparing interest rates and annual percentage rates (APRs) will give you a good sense of what you might expect to pay over the life of your home loan from different lenders. Go through several mortgage applications and credit checks with different types of lenders—virtual, brick and mortar, national, regional, local, and credit unions. It’s even easier now that you can do much of your lender pre-research and prep online with peer reviews giving great insight. If you have a relationship with a real estate professional, their guidance and network of contacts can be invaluable at this stage.
When comparing lenders, be sure to find out what their pre-approval process is. Some can be done with ease online, others might require official exchange of paper documents and an office visit. When you find a lender that complements your schedule, checks all the boxes, and is a good fit, it’s time to take the next step: getting proof that they’re willing to lend you the money. The pre-approval letter will give you an estimate of the mortgage payment and interest rate you can expect…and it shows potential sellers you’re qualified and ready to buy.
Of all the home buying phases, it’s the mortgage process that often causes the most anxiety. This can be especially true for first-time homebuyers—there’s a level of unknown, and unless you’re well-versed in the intricacies, it can feel daunting.
Finding the best mortgage lender for you can go a long way in making your first home purchase a pleasant and memorable experience.
From the early planning stages, to the offer, through final closing, working with the right lender can make all the difference for first-time homebuyers.