A Basic Guide to Mortgages for First-Time Homebuyers
Buying your first home can be one of the most exciting seasons of your life. However, along with the excitement may come uncertainty and anxiety. There are a lot of aspects to remember and learn when going through the mortgage process for the first time. Here are a few things to know about mortgages as you navigate this tricky process:
Getting pre-approved for a loan should be the first step in securing your first mortgage and home. When first-time home buyers get pre-approved, it shows your real estate agent and the home seller that you’re very serious about buying, and it gives you a good idea of how much home you can afford. Going through the process of pre-qualification will also help you to understand exactly what you should be looking for in terms of house prices.
To get through the qualification process, you will need to jump a few hurdles. Due to recent changes in accounting standards, loan institutions will begin using current expected credit loss (CECL) accounting practices when evaluating loan applications. Under this plan, lenders group loan applications together based on financial risk factors and projected losses. However, some applicants still qualify for individual review.
For lenders, CECL may affect interest rates and loan terms. It’s important to take steps to minimize risk factors as much as possible before applying for a mortgage. Heading into the process, it is a good idea to get your credit cleaned up and correct any outstanding issues. Your income will also be an overriding factor in how much you qualify to borrow. Anything that you can do to pad this number heading into the qualification will make it easier for you to borrow what you need.
Choosing the Best Mortgage
With so many different loan options on the market today, it can often be overwhelming to decide which type of loan is best for you. This is an instance in which you can save thousands of dollars by doing the proper research. Government-sponsored home loans such as an FHA loan are popular with first-time buyers because of the lower credit score requirements. Va Loans are popular with veterans, though keep in mind that depending on the state how the loan behaves changes slightly. California rules for loans of these types might be vastly different than other states. Other conventional loans can be a good choice if you shop around for favorable interest rates and terms.
Consider the Terms
When deciding on a loan, it is important to consider the specifics of the term. The first element is whether you desire a fixed rate or an adjustable rate. If you are buying an expensive home, you will need to decide if you would like a conforming loan or a jumbo loan.
Taking the time to perform your due diligence in researching and understanding the mortgage process will put you in a better position to advocate for yourself. By planning ahead and educating yourself about the ins and outs of mortgage loans, you can be better prepared for what lies ahead.
Magnolia Properties wants to help make the process of getting your first home as easy as possible. That’s why we provide an updated database of recent home listings in Jacksonville for you to explore. If you have any questions on buying, selling, building, or more, please feel free to contact us!