8 Ways First-Time Homebuyers Can Prepare for a Mortgage

Written by Posted On Monday, 30 March 2015 13:09

8 Ways First-Time Homebuyers Can Prepare for a Mortgage

(BPT) - When it comes to buying your first home, a lack of knowledge and experience can lead to costly mistakes. One in four first-time homebuyers say they are completely unfamiliar with the mortgage financing process, according to a report by the Consumer Financial Protection Bureau (CFPB). Even among those with an understanding of the overall process, the report found that many first-time homebuyers still had significant knowledge gaps in important areas such as available mortgage rates, closing costs, down-payment requirements and income required to qualify for a loan.

First-time homebuyers can become mortgage-ready with these tips.

1. Adjust your budget. A mortgage payment can increase your monthly housing expenses, so prepare by calculating what that amount will be and begin saving that same amount every month so you can get used to the budget change in advance.

2. Plan for a down payment. Nearly all home loans will require you to put some money down as a down payment. Some home loans may require as much as 20 percent of the purchase cost as a down payment, although some Federal Housing Administration (FHA) loans may require less. Decide on the amount you think you'll need and create a savings plan to help you reach that goal.

3. Consider the location and type of home you want to buy. Many factors influence the cost of a home, including its location, size, style and more. A larger home in a high-income area will generally cost more, and property taxes will be higher on a bigger, newer, well-located home. Many first-time homebuyers find manufactured or mobile homes are a good option. Knowing the estimated cost of the type of home you want to purchase can help you better manage your budget.

4. Stay on top of your credit. Lenders will consider your credit score and report history when determining your mortgage eligibility and the interest rate they may offer you. Make sure to review your credit report in advance. You can download a free credit report once a year from all three major bureaus at www.annualcreditreport.com. If you're planning to apply for a mortgage, it's a good idea to review your report more frequently and to consider paying to obtain your credit score from at least one major bureau. If your report contains errors, work with the credit bureaus to have them corrected before you apply for a mortgage.

5. Keep current on monthly bills. While it's important to save toward a down payment, don't let monthly bills slide. Paying your bills on time every month can help increase your credit score, and a good payment history is something lenders look for when reviewing your credit report. Use online tools like email reminders and automatic payment options to help ensure you never miss or make a late payment.

6. Work on your debt. If you have delinquent balances, bring them up to date as quickly as possible. If you carry a lot of revolving credit card debt, you may want to work to reduce it by paying more than the monthly minimum payment. While it helps to have a report that shows no late payments, the most important thing is to not have any delinquent balances before you apply for a mortgage.

7. Plan for escrow. In addition to the amount you will need each month toward repaying your mortgage, you'll need escrow - an amount added to and collected with each monthly mortgage payment that is applied toward annual homeowners' insurance premiums and/or taxes. Estimating taxes and total insurance costs can help you better understand how much your escrow will be each month, and you'll be able to budget more accurately as you prepare for homeownership. Don't forget that this amount may adjust every 12 months if your insurance premium or taxes change for the next year.

8. Take advantage of educational resources. Check out resources like the Consumer Financial Protection Bureau (CFPB), the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA).

Reprinted with permission from RISMedia. ©2015. All rights reserved.

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Diana Merola

Diana Merola has lived in the Colorado Springs/Monument area for the past 13 years.  She is a graduate of The University of Texas where she earned her Bachelor's degree in Business with a concentration in Marketing.  In 2004, Diana further earned her real estate broker license and is associated with Shorewood Real Estate as a Broker Associate.  She will guide you through a smooth real estate experience, communicating with you throughout.  Diana's attention to detail will impress you and often her listed homes sell ahead of the average, selling homes in all price ranges. Through good markets and slow markets, you can count on Diana to help you get your property sold. You are most important and you are assured the one on one attention you deserve.

Diana is an active member of the Pikes Peak Association of Realtors, National Association of Realtors, and the Colorado Association of Realtors.  She has extensive experience with Relocations, Military families & USAA members.

Diana began her career working with Fortune 500 Companies, marketing in several Southern and Eastern states around the country eventually becoming a District Manager.  Over the years, her development of business, keen skills and public relations afforded her the opportunity to become a successful business owner and Entrepreneur.  Diana's success was enhanced by the support of her husband Ken and when it came time for his business move to Colorado, Diana supported his move as well.  Diana sold her own business in a short period of time and came to realize the start of a career in real estate.  Diana’s extensive business  knowledge, attention to detail and negotiating skills are all benefits as a Realtor but it is the genuine care she has for her clients that really drives her.  Diana's husband is an Engineer in Colorado Springs.  They have three wonderful kids. Their youngest graduated Lewis Palmer High School in May Summa Cum Laude and is attending the University of Colorado, Boulder studying computer science. He also volunteers with Diana for the Fostering Hope Foundation. Their daughters, one in her last year in college and the other a Physician Assistant love to spend their time in the Colorado mountains snowboarding or climbing "The Incline".  Who can resist the beautiful snow and Colorado blue skies!! 

But when it's time to for business, Diana would love to put her experience to work for you.  Whether you need to sell your home or find your perfect home, Diana can help.  "Call anytime, I am only a phone call away.  I look forward to hearing from you."

A Special Thank You to our Military Men and Women For Your Dedication to our Country!
 Including my father who at the age of 17 left his senior year to enlist in the Navy to fight in
 World War II and later in the Korean War.  My heart is with you, the military families.

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