First Time Homeowner Credit: Learn About 5 Don'ts
Many first-time homebuyers face challenges to get a home matching their personal needs. Apart from that, the funding process takes tons of effort & time. Moreover, the process is hard to understand as there are many credit sources available. But which one to opt for? Moreover, the process is hard to understand as there are many credit sources available. First-time homeowners are those younger people who are still early in their careers with lower salaries. Luckily, a mortgage termed joint borrower sole proprietor mortgage (JBSP) is for them. Aside from JBSP, what are the options that first-time homebuyers may opt for? In this guide, we put together 5 common first-time homeowner credit mistakes that can help you to get into the right financing.
Down Payment By Not Analyzing Your Future Income
The first consideration while deciding loan, analyze how much down payment you can make conveniently. Make sure to determine your future income. This will help you to decide the down payment more accurately. Some lenders offer conventional loans with a lower down payment per month to first-time homebuyers having excellent credit scores. Here, you can also use a down payment calculator online to decide your better financial goals.
Going without Checking Your Credit
Even if you're accessing a small amount of money, financial institutions won't give loans to first-time homebuyers without verifying their credit history. Do the advance preparation to have approval from the lenders. Follow these steps few months prior to strengthening your credit score for buying a house:
- Look for free copies of your credit reports from the credit bureaus such as Experian, Equifax, etc. Resolve the errors that could hurt your credit score.
- Ensure to pay bills on time and keep credit card balances as low as possible.
- Track your credit score frequently
Finalizing Before Exploring Mortgage Options
Another mistake is to finalize before researching other mortgage options. Here are the main categories:
- Conventional mortgages: One option is conventional mortgages which include fewer monthly down payments. Be sure that the government does not govern these mortgages.
- FHA loans stand for Federal Housing Administration and offer down payments as low as 3.5%.
- USDA loans are actually for rural homebuyers and do not include down payments. The U.S. Department of Agriculture guarantees these loans.
- VA loans are majorly for current and veteran military service members and also are free of down payments. These loans are guaranteed by the Department of Veterans Affairs.
- A 30 year and 15-year mortgage term loan for first-time homebuyers are also favorable options. The less period term loan means low-interest rates.
Avoiding Assistance Programs
Every US state and many counties & cities offer first-time homebuyer assistance programs. Many first-time homebuyers ignore or are not aware of these lower-interest-rate mortgages combined with down payment assistance and closing cost assistance. So, you never know how great help you can get if you research state assistance programs.
Not Comparing Mortgage Rates and Fees
Once you finalized a few options of raising finance to buy a home, compare the mortgage rates and additional fees. Some lenders also give you the opportunity to purchase discount points which help borrowers to reduce down payments. Buying the discount points is like an upfront fee.
These are 5 mistakes that many first-time homebuyers are not aware of. Make sure to keep these points in mind before finalizing the loan.