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What every first-time homebuyer should know.

One of life’s most exciting milestones is buying your first home. It’s a big purchase, likely your biggest to date, and the process can be a bit overwhelming if you’re not prepared.

So, what should you do first? Check your credit score. You can request a free credit reportThird Party Link every year from each of the big three credit reporting agencies: Experian®, TransUnion® and Equifax®. Review your report carefully, because your score can seriously impact the amount (and the interest rate) you can borrow from a lender. Also be sure to correct any errors on your report and take steps to improve your score (if necessary), before you start looking for your dream home.

Next, determine how much home you can afford by getting pre-qualified or pre-approved for a mortgage (or do both, depending on where you are in the home-buying process). Each will give you an estimate of what you can afford, but there are important differences you should note.

We’ve broken it all down for you below.

All about pre-qualification

Why should I get pre-qualified?

  • You’ll find out if you can afford to buy a home.
  • You’ll get a ballpark estimate of how much you can borrow.
  • You’ll be able to estimate your monthly mortgage payment, depending on the loan term and interest rate.
  • You’ll save time on your home search by focusing on properties you can afford.
     
When should I get pre-qualified?

It’s best to get pre-qualified before you start your home search.

How do I get pre-qualified?

Depending on your lender, you can apply online, by phone or in person.

What do I need to prepare before meeting with a lender?
Be prepared to answer these questions:
  • Is your credit in good standing?
  • What is your annual income?
  • How much outstanding debt do you have?
  • Do you have steady employment?
     
How much does it cost and how long does it take?

It’s usually free and can be done the same day.

What will be included in my pre-qualification letter?

It will include the mortgage amount you may be qualified for and the terms of the loan, such as the interest rate and monthly payments.

All about pre-approval

Why should I get pre-approved?

  • You’ll know exactly what you can afford and the terms of a mortgage you’re approved to borrow.
  • Your offer may be taken more seriously by a seller.
  • You may be able to close on your home loan faster.
     
When should I get pre-approved?

It’s best to get pre-approved before you make an offer on a home.

How do I get pre-approved?

Depending on your lender, you can apply online, by phone or in person.

What do I need to prepare before meeting with a lender?

Be prepared to provide documentation:

  • A completed mortgage application
  • Two to three months of bank statements
  • Two to three months of pay stubs
  • Two years of W2 forms
  • Two years of tax returns
     
How much does it cost and how long does it take?

It’s usually free and can take a week or more.

What will be included in my pre-approval letter?

It will include the mortgage amount you are approved for and the terms of the loan, such as interest rate and monthly payments.

If we can help you with your pre-qualification or pre-approval needs, schedule an appointment with one of our mortgage bankers.

For more great tips on buying your first home, visit the Your Home section on Your Financial Life.

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