Buying your first home can be an intimidating process. You may not be sure where to start, and the information out there can be overwhelming. You may not give much thought to your local bank when it comes to mortgages. You’d be surprised, though, at what your local bank has to offer. For example, here at Arthur State Bank, we offer much more than checking and savings accounts and personal loans. We work with first-time homebuyers in South Carolina, ensuring they get the right mortgage for their financial situation at an affordable rate.
To help you prepare for buying your first home, we’ve prepared this guide. We outline the ins and outs of buying your first home, including what to avoid and what to ask your lender.
If you’re eager to purchase your first home, you may be tempted to start hitting open houses and meeting with real estate agents. Although it doesn’t hurt to take a preliminary look to get a sense of how much homes cost, a better place to start is with your financial situation. Here are the first steps you should take to get ready to meet with lenders:
- Review your credit. You can get a free copy of your credit report once per year at annualcreditreport.com. Check to make sure the information is accurate, and contact the relevant credit bureau if there are any errors. You may also want to find out your credit score, which you can find out through free and paid online services.
- Review your financial situation. Take a look at your current spending and decide how much you can realistically afford to spend on monthly mortgage payments. Make sure to account for those unexpected expenses that come with owning a home, such as broken appliances and lawn care. Keep that monthly payment amount in mind when you start reviewing mortgage offers.
- Decide on a down payment. Decide how much you can realistically afford as a down payment. Be upfront with potential lenders about how much you can afford to put down. Remember, the larger your down payment is, the lower your monthly payments will be.
- Gather your financial information. The Consumer Financial Protection Bureau recommends you have the following information gathered to complete loan applications:
- Your two most recent pay stubs
- Your past two years of W-2s
- Your previous two years of federal tax returns
- Your two most recent bank statements
- Documentation of any name changes
- Documentation of the source of your down payment
Once you completed the steps, you’re ready to start talking to lenders.
What to Avoid When It Comes to Mortgages
When it comes to mortgages, there is no one-size-fits-all solution. Everyone has different needs, and the mortgage that was right for your parents might not be right for you. With that in mind, though, there are some things to avoid when you’re shopping for a mortgage.
- Opening new credit. Taking out personal loans or getting a credit card may seem like a good way to handle the expenses involved with buying a home. Unfortunately, this could impact your debt-to-income ratio, which is the total amount of debt you have as compared to your income. Applying for new credit also shows up as an inquiry on your credit report, which lowers your credit score.
- Pushy loan officers. A good loan officer will work with you to connect you with a mortgage that meets your financial needs. They will be happy to give you information in writing and giving you time to think about whether you want to move forward. If you’re feeling pushed to commit to anything, consider taking your business elsewhere.
- Only getting one quote. It can pay to shop around. While interest rate is important, there are a lot of other variables that impact your ability to be approved for a mortgage as well as the total monthly mortgage and lifetime cost of the loan. Be sure to compare all of the information before you make your decision to apply for a mortgage.
Look for a lender that has worked with other first-time homebuyers in South Carolina. For example, at Arthur State Bank, we’ve worked with thousands of homebuyers of all types over the course of our 86-year history.
What to Ask Your Lender
Don’t be afraid to ask your lender any questions that you might have. Some good questions to ask include:
- What is the requirement for a down payment?
- What is the interest rate?
- Is the interest rate fixed or adjustable?
- If it’s adjustable, how often does it adjust?
- What is the APR?
- How long is the loan term?
- How long is my rate locked in?
- How much will my closing costs be?
- What is Private Mortgage Insurance (PMI) and how will it impact my mortgage payment?
- What is the total monthly payment?
- How long will it take for me to get a decision on my mortgage loan application?
If you feel comfortable with the prospective lender, complete a loan application. The lender will provide you with the loan estimate. Carefully review your estimate and ask your lender any additional questions you have. Once you’ve reviewed all your loan estimates, choose a lender and get preapproved. Once you’re preapproved, look for a home that fits your budget.
Your Trusted Partner
At Arthur State Bank, we will work closely with you to help you find the right mortgage for your needs. We offer a variety of mortgage products, as well as a mortgage designed specifically for first-time homebuyers. All mortgage decisions are made at the branch level, and loan applications are typically processed within a day so you get a quick response.
Contact us today to get the process started so you can achieve your dream of home ownership.