Buying your first home is an exciting milestone to achieve. The mortgage process can seem pretty intimidating but there’s really nothing to be frightened about. To alleviate some of your concerns, we thought we’d go through a few of the most common fears of homebuying and how those fears can be overcome.
Fear of the unknown
The mortgage process can appear complicated, with lots of paperwork and new phrases and lingo. FinLocker has over 120 short videos covering each step in the mortgage process, common mortgage terms, loan products, and to prepare you for homeownership. There are also articles on home buying, credit, and insurance. While you’re preparing to buy a home, start uploading your financial documents to your FinLocker Document Vault. When you’re ready to apply for a mortgage, your financial data and documents can be securely shared with your loan officer directly from your FinLocker to start your mortgage application.
Creepy credit scores
Most mortgage loan options require a minimum credit score of 620. However, the higher your credit score, you’ll be more likely to be offered favorable terms. If you need to increase your credit score, make all loan and credit card payments on time and reduce your credit utilization. Those two factors impact 65% of your credit score.
Devilish down payments
You don’t need to save a 20% down payment to qualify for a mortgage. There are many low down payment options. For those who qualify, an FHA loan can be obtained for 3.5% of the purchase price, a conventional loan for 3%, and VA and USDA loans for 0% down payment. There are also down payment assistance programs to further reduce the amount you need to save.
Dreaded debt-to-income ratio
Keeping your debt-to-income (DTI) below 45% will be looked upon favorably by lenders when they evaluate your eligibility for a mortgage. Reduce your DTI by paying off high-interest credit cards first, but don’t close the accounts, which will negatively impact your credit score. Monitor your debt-to-income ratio on the Readiness tab in your FinLocker.
Monstrous monthly payments
If you’re currently renting a house or an apartment, it’s quite likely you can afford a monthly mortgage payment. It’s still more affordable to buy than rent a home in two-thirds of the country. FinLocker analyzes your enrolled financial data to calculate a monthly mortgage payment based on your income so you can compare that to your current rent. You’ll also receive a recommend home budget to see what you can buy in your preferred neighborhoods.
Fear of commitment
If the idea of committing to a 30-year mortgage sends shivers down your spine, fear not! At any time during your mortgage term, you can sell the property. Selecting a 30-year loan term enables you to have a lower monthly mortgage payment. If you’d like to pay off the loan faster, you can add more money to the principal at any time. Use the Home Affordability calculator in FinLocker to compare monthly mortgage payments for 30 years, 25 years, 20 years, 15 years, and 10 years mortgage terms.
You won’t be alone on your homebuying journey, either. FinLocker, your real estate agent, and your loan officer will be your spirit guides to help you prepare, find and buy your home. With mortgage interest rates low, there’s no better time to conquer your fears and confidently skip down the path towards homeownership.