Looking to buy your first home?  What's the first step? Do you have everything prepared? What should you expect?

All questions that borrowers in your position have asked as well. Obtaining a mortgage can seem daunting, what with all that's involved. With help from our mortgage process checklist, you can confidently head into the application process.

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1. Do You Understand Your Financial Health?

That means knowing where you stand on the credit score spectrum, the factors that contributed to your rating, and just how much house you can afford. A big mistake buyers make? Not knowing how much they can afford.

If you don't have an understanding of your finances, it's easy to fall in love with a home that you just can't afford. It's never a good idea to stretch yourself financially, but that especially holds true when it comes to buying a house.

Your FICO 5 score is the score mortgage lenders care about

2. Are Your Finances in Order?

Do you have a certain amount saved for a down payment? What about closing costs? Buying a home comes with upfront costs and you need to be prepared for those. Check out this article for five simple ways to save for a down payment!

It's always best to pay down large debts before taking on a mortgage. In the months or even years leading up to your first home, be sure you're meeting your financial obligations, as that will help you secure a competitive debt-to-income ratio and protect your credit score, both of which will come in handy when it comes time to secure a home loan.

Being a homeowner comes with unexpected expenses. If something broke down in your apartment, it was the landlord's job to fix it. Now those unexpected expenses fall on you. For that reason, be sure you have a rainy day fund set aside so that if an unexpected expense does arise, you won't have to dip into your savings.

Shape up your finances prior to applying for a mortgage or refi

3. How Long Will You Live in the House?

This is an important question to answer, as it helps determines what type of mortgage is better suited to your needs. For example, if this is your very first home and you only intend on staying for a few years, an adjustable-rate mortgage may be the route for you.

Most people purchase more than one home in their lifetime, so decide if this is a starter home for you or if you think you'll be in it for the long run. While you don't need to figure out the exact amount of time you'll live there, it's helpful to have an idea, especially if you're purchasing the home with your significant other. Everyone needs to be on the same page!

4. Do You Know Your Mortgage Options?

Now it's time to delve into the choices you have. 30-year options, 15 years, VA mortgages, conventional loans, adjustable rates . . . The list goes on! We explain and simplify the most popular loan products here.

It's unrealistic to think that you'll know the ins and outs of every mortgage setup out there, but it's helpful if you have a general understanding of popular options. Here's a quick breakdown to help get you started.

  • 30-year fixed: Typically offers lower monthly payments but takes longer to own your home
  • 15-year: You'll own your home sooner but will be faced with higher monthly installments
  • Adjustable-rate: Has an interest rate for a set period of time and  then that rate periodically resets
  • Conventional: May offer the most competitive rates if you've saved enough for a 20 percent down payment

There are many options to explore and factors to consider, and that's where your lender comes in. They'll be able to make recommendations for you based on your situation.

5. Have You Compared?

The best way to get competitive mortgage terms? Compare, compare, compare!

With help from Lendgo, it's easy to connect with lenders and then compare all your offers to ensure you're getting competitive rates. By negotiating low interest rates for yourself, you could potentially save thousands over the life of your loan!

6. Did You Get Preapproved?

Are you planning on purchasing your new home with cash? If not, it's time to get preapproved for a mortgage. Is this step a requirement? No. Is it recommended? Absolutely. By getting preapproved, you show that you're a serious buyer who knows how much they'll likely get approved for.

Getting preapproved is as close as you can get to obtaining a mortgage without actually having one. We explain the difference between preapproval and prequalification here.

7. Have You Found a Home and Made an Offer?

Most buyers choose to work with a real estate agent, so now is the time to find one. When it comes to buying a home, there's more to take into account than the house itself, like:

  • What's the surrounding area like?
  • How does the location impact your work commute?
  • Nearby school districts if you have children

In other articles we discuss the advantages of buying a home in a new neighborhood and buying a home in an older neighborhood because you might want to focus your search in one type of neighborhood.  

Once you've found the home that meets all of your requirements, it's time to make an offer. Hopefully, everything goes according to plan and your offer is accepted. From there, most buyers choose to have a home inspection done, as it can provide much-needed peace of mind.

8. Time to Formally Apply for a Mortgage

Since you've only been preapproved for a mortgage, it's time to officially apply for a mortgage. As you've already done most of the leg work, this process should be fairly easy. It mostly comes down to supplying your lender with any documentation they require.

Learn to compare mortgage estimates like a pro

An appraisal will also be conducted during this part of the process, which helps the lender ensure you're not overpaying for the home. Keep in mind, the buyer pays for the home appraisal in most cases.

9. Don't Forget About Homeowners Insurance!

Before closing, you'll likely need to have a homeowners insurance policy ready to go. Remember, shopping around and comparison shopping isn't exclusive to obtaining a mortgage—it should be done any time you're making a purchase that requires monthly installments!

10. Get the Keys to Your New House

The time has come for a final walkthrough to ensure the home is in the same condition as the day you made an offer. You'll go through any last formalities, like completing paperwork, and finally you'll get the keys to your new home!

Set Yourself Up for Savings

Has the time come to buy a home? It has never been easier to find lenders and compare rates, thanks to Lendgo. It's free to use and may help you save thousands. Start rate shopping now!

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