How to Get Approved for a Home Loan: A First Time Buyer’s Guide

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how to get approved for a home loan first time buyer

When it comes to the quintessential American dream, home ownership is a staple in most people’s plans. In fact, according to a study done by LendingTree, 84% of Americans hope to be a homeowner some day. After all, home ownership provides a sense of stability that allows people to form deeper connections with their communities. However, purchasing a home is rarely a straightforward process and there are a lot of challenges that people might face along the way. The first? Securing the financing. Which leaves many wondering how to get approved for a home loan as a first time buyer. Luckily, there are some steps you can take to tackle this first major hurdle toward home ownership.

Understanding Your Financial Situation

When it comes to how to get approved for a home loan as a first time buyer, assessing your financial situation is a crucial first step. In general, you’ll want to analyze your current financial health, identify areas for improvement, and figure out how much home you can afford.

Checking your credit score and evaluating your debt-to-income (DTI) ratio is a good baseline. From there, you’ll want to check your savings, set a budget, and do some quick calculations with your monthly cash flow. This will help you determine whether or not you currently have the positive cash flow you need to cover mortgage payments and other costs associated with home ownership.

How to Get Approved for a Home Loan as a First Time Buyer: Saving for a Down Payment

Next, you’ll want to start building up your savings to cover a down payment. A down payment on a home is one of the most critical things to have in place before you move forward on the path to ownership. The larger your down payment, the more you can reduce the loan amount you’ll need which, in turn, can lower monthly payments. A down payment can also contribute to the initial equity in the home and lower interest costs.

In order to save up for a down payment, it’s important to set realistic goals. Again, this is where you’ll want to have a concrete idea of how much you can afford to spend on a house. Online mortgage calculators can help you with this step. From there, you’ll want to set a firm budget, decide on a timeline, and consider setting up automatic transfers from your checking to your savings account.

If you need additional help, there are down payment assistance programs available. Grants and low-interest loans may be available to certain individuals from local, state, or federal organizations. Keep in mind that while grants do not need to be repaid, loans do, and this will contribute to your monthly payments in the future.

Getting Pre-Approved for a Mortgage

With your finances in order, it’s time to apply for pre-approval! Pre-approval signals to sellers and real estate agents that you are a serious and qualified buyer, which will help your credibility during the home buying process. It will also let you know exactly where you stand in terms of what you can afford.

Here’s what you’ll need to have on hand when you apply for pre-approval

  • Proof of identity and income
  • Employment verification
  • Credit history
  • Debt information
  • And asset information

How to Get Approved for a Home Loan as a First Time Buyer: What Are Your Mortgage Options?

When people wonder how to get approved for a home loan as a first time buyer, they sometimes don’t realize how many options they actually have. As soon as you’re ready, you’ll want to make sure to do some research.

First, research various lenders including banks, credit unions, and online lenders to compare interest rates, loan terms, fees, and customer reviews. Many lenders will offer multiple loan products, which will allow you to choose the one that best fits your financial situation and goals.

Then, you’ll want to look into the multiple options available. One of the first decisions you’ll probably want to make is whether to try to get a fixed-rate or an adjustable rate mortgage (ARM). Both come with significant advantages and risks. Be sure to consider all aspects and consult with a real estate or lending professional for additional guidance.

Within a fixed rate mortgage, you also might have the option of choosing between a 15-year fixed rate or a 30-year fixed rate mortgage. Again, it’s important at this stage to consult with a professional who can help you make the right decision.

And finally, there are a few government-funded options for those that qualify, including FHA, VA, and USDA loans.

How to Get Approved for a Home Loan as a First Time Buyer: Building a Strong Application

It’s time to apply! When completing your loan applications, accuracy is key. Make sure that all information you provide is complete and up-to-date. You’ll also want to make sure you fully understand all the related terms and disclose all your existing debts. Similar to the pre-approval application, you’ll need to include documents to verify your income, asset information, employment verification, and an explanation for any large deposits you might have made into your account.

It’s also important at this stage to be proactive about addressing any red flags that might be in your application. Consider writing a letter to explain discrepancies or late payments in your credit report. Employment changes, unusual financial activity, and a high debt-to-income ratio might also merit a more in-depth explanation.

Working with a Real Estate Agent

If you’re still wondering how to get approved for a home loan as a first time buyer, or you just want some additional guidance from an expert, consider working with a real estate agent throughout the process. Real estate agents can provide expert knowledge of local housing markets, neighborhood trends, and market conditions to help you make a more informed decision.

When it comes to applying for a loan, real estate agents can offer invaluable insight on reputable local lenders and mortgage professionals who can assist you in the process. One you’ve applied, real estate agents can also facilitate smooth communication between you and your lender to help ensure a smooth, timely approval.

Trust the Experts at CENTURY 21 Bolte Real Estate with Your Mortgage Application Process

Applying for a home loan is an extensive process; it’s also only the first step toward home ownership. After approval, you’ll start your home search, which comes with a whole new set of challenges and obstacles. Fortunately, the experts at CENTURY 21 Bolte Real Estate are here for you every step of the way.

CENTURY 21 Bolte Real Estate has been serving the needs of home buyers and home sellers in the North Central Ohio area for more than 80 years. We’re a team of passionate professionals that is dedicated to helping you reach your real estate goals. Whether you’re a first time home buyer looking for a trusted guide, a current owner looking to sell, or a seasoned investor that wants to find a reliable partner, we’re here to  help with whatever you need.

Reach out to our team today to get started.

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