What to Consider as a First-Time Homebuyer

Buying a home for the first time can be intimidating. Whether you’re fresh out of college or buying for the first time later in life, there are several things potential homeowners need to consider before making a purchase. Making a wrong decision when it comes to buying a home will not only be disappointing, it will be costly.

Here are a few things consumers should keep in mind before signing on the dotted line:

What type of mortgage is best?

Deciding what type of mortgage to pursue is one of the biggest decisions homeowners make before buying their home. Fixed-rate and adjustable-rate mortgages each have their own advantages, but they can be costly for individuals who choose the wrong one. To ensure that doesn’t happen, consumers should consider three things: how long they plan to stay in a home, how much they can afford as a monthly payment and how high interest rates are at the time they want to purchase.

Fixed mortgages tend to be better for homeowners who plan to stay in their homes for many years. Adjustable-rate mortgages go up over time, which means homeowners in it for the long haul might find themselves making higher monthly payments several years later than when they first started. Individuals who don’t have room in their budget for an increasing payment might consider shying away from this option.

However, adjustable-rate mortgages can be great for homeowners who think they might move in a few years. If an individual purchases a home when interest rates are low, they will likely reap the reward of lower rates on the monthly payments and leave before rates increase. Adjustable-rate mortgages can also be a savvy choice if interest rates are high when a homebuyers move into their home. In this case, as interest rates fall over time, homeowners will also see their monthly payments drop.

How can I impress my lender?

For those who have never applied for a mortgage before, it can be confusing to know what lenders will use to determine a consumer’s eligibility. Simply having a lot of money in the bank won’t guarantee a lender’s approval. An individual’s credit score will hold the most sway over lenders when they are determining whether to approve someone for a loan. Banks will typically look at that score, any unpaid collections, or previous bankruptcies or foreclosures.

To maximize the likelihood of getting approved for a loan, individuals should seek to reduce their debt-to-income ratio and pay down any outstanding debts. This can give a quick boost to a person’s credit score in the month before a lender makes a decision about a loan. If it’s within their budget, individuals who make a larger down payment also increase their chances of approval and getting a lower interest rate from lenders, according to Nerd Wallet.

Home Financing, Ryan HatleliRyan Hatleli (NMLS#174748)
Branch Manager at New Penn Financial
(605) 877-3485; rhatleli@newpennfinancial.com; www.newpennfinancial.com/rhatltli



6 thoughts on “What to Consider as a First-Time Homebuyer

  1. That seems like a good idea to decide how much you can afford as a monthly payment, how long you plan to stay in the house, and what the interests are when you want to buy it. My husband and I want to find a home that we can stay in for a long time and raise our kids. We only have two right now, but we’re thinking about having at least two more. Thanks for your advice, it’ll help us buy the right real estate.

  2. My wife and I are getting ready to buy our first home together, but we aren’t sure where to start when it comes to getting a mortgage. I like that you mention how fixed mortgages are better for people who intend to stay in that home for many years. I feel like, as first-time homebuyers, we should go with an adjustable-rate mortgage in case we end up moving again. Thanks for sharing.

  3. I found it interesting when you said that fixed mortgages tend to be better for homeowners who plan to stay in their homes for many years. We sister and his husband are planning to buy a home which they can stay for a long time to raise their children, and they’re considering to get a mortgage loan. I’ll inform to inquire about fixed mortgage loan and see if this is a great option for them.

  4. Thanks for letting me know that your credit score will hold more sway than the amount of money you have when applying for a mortgage. My husband and I have been saving up our money for a while so we can purchase our first house, but I didn’t realize that working on our credit score might be a more valuable use of our time. We want to make sure we can get a really good mortgage, so maybe we should check our credit score and get going on that as well.

  5. I wanted to thank you for going over some advice for a first-time homebuyer. I appreciate that you explained to think about how long you plan to stay at a home because it could affect what kind of mortgage you get. It sounds important to have a plan or a goal in mind, especially if it can narrow down where you choose to live or what mortgage to get.

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