Buying a home is one of the most expensive things the average person will do in their lifetime. A mortgage is viewed as the default way to finance this purchase, but getting one isn’t always easy, especially for a first-time homebuyer. There are a ton of factors and steps involved in the process, and someone who’s new to the real estate market may not know all the best practices and industry tips.
To help, we asked 14 experts from Forbes Real Estate Council how to increase your chances of getting a mortgage as a first-time homebuyer. Here are their recommended tips to improve your odds of success.
Members of Forbes Real Estate Council share tips on how first-time home buyers can increase their chances of being approved for a mortgage.
Photos courtesy of the individual members.
1. Start Financial Planning In Advance
One must plan a home purchase at least a year prior to purchasing. Besides saving up for a down payment and doing further work on your credit score, ensure that you document your income and that you meet the debt-to-income ratio for the loan amount you are requesting. One almost always has to shop for a loan through a mortgage broker and get that pre-approval. – Venkat Avasarala, Raven Multifamily
2. Get Prequalified Early
Plan ahead. Get prequalified early so you know exactly where your credit is and how much purchasing a home will really cost you in terms of the down payment, closing costs and other miscellaneous costs. There is more involved in buying a home than a FICO score, down payment and picking out furniture. Find a lender you trust that will walk you through every step of the process. – Jammie Jelks, Legacy Home Loans
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3. Speak With A Financial Advisor Or Mortgage Broker
Before even applying for a mortgage, it’s vital to understand your finances. Sit down with a financial advisor or a licensed mortgage broker to look at what you can afford. It’s important to know how much you can afford and the down payment requirements to determine the type of mortgage you choose and the lender. – Daniel Kroft, Giant Containers
4. Clean Up Any Outstanding Debt
The most expensive thing a person can do while taking on a mortgage is not investigating and cleaning up outstanding debt. Rates and services vary. The best practice is to use a recommended lender if there are issues that can be addressed by a knowledgeable guide in what is, in essence, a person’s first major financial journey. The best advice for first-time buyers, or any buyer, is to plan for the worst-case scenario. – Alexander Chandler, Berkshire Hathaway HomeServices Alexander Chandler Realty
5. Find A Mortgage Broker Before Making An Offer
Research and hire a competent mortgage broker and begin the process immediately. Too often we find buyers put the horse before the cart and find a home they want to purchase before they have fully secured financing. If a buyer is secure with their financing, they can remove it as a contingency and increase their chances of securing a better price and a smoother transaction. – Andrew Whiteley , AFA Homes – William Raveis
6. Pay Down Debts
Reduce your debt-to-income ratio by paying down all the debt with the highest monthly recurring payments first. Make sure there are no inaccuracies in your credit report and refrain from applying for any form of credit at least a few months before applying for a mortgage. Make sure that your credit score is as high as possible and ideally no less than mid-600s. – Mario Sandino, First Service Realty ERA
7. Restructure Your Recurring Debt
Your purchase power is directly impacted by your recurring debt payments. Maximize your purchase price by paying off or restructuring your debt to reduce your monthly payments. Doing so will free up more of your monthly income to apply towards your mortgage purchasing power. – Justin Fox, RE/MAX Professionals
8. Establish Consistent, Stable Employment
Nothing can replace the impact of stable employment. No matter what you do, whether it is coaching football or building a business, you have to be constant. Constancy builds consistency, and consistency builds reputation. If you don’t have constant employment with the same employer, get started ASAP. Even a few months of stable earning can help make your dream of homeownership into a reality. – Michael McMullen, Prominence Homes and Communities
9. Check Your Credit
As a first-time homebuyer, the best way to increase your odds of getting a mortgage loan is to check your credit and save up for a down payment. Many low down payment programs exist, including 3.5% FHA loans, but some of these come with higher interest rates and private mortgage insurance (PMI) payments. Having a larger down payment and good credit will increase your borrowing power and save you money. – Tara Hotchkis, Compass
10. Be Honest On Your Application
Don’t fib on the application! Have 12 months of check stubs verifying employment at the ready. Pay off any small revolving amounts or long-term commitments. Don’t buy anything other than necessities during the lender approval period. Obtain and give all information requested to the lender in a timely manner. – Rita Santamaria, Champions School of Real Estate
11. Ask Your Lender What They’ll Be Looking For
Get a headstart. Buying a home is not an overnight decision. That being said, reach out to your lender for a checklist of what they will be looking for and start working on it now. That may be anything from cleaning up items on your credit to sourcing down payment funds. Even self-employed people may need to show more steady income leading up to the pre-approval process. Give yourself a few months. – Kofi Nartey, SOCIETY Real Estate + Development
12. Minimize Any Unnecessary Expenses
Getting your credit and finances ready to buy a house is simple. Start by minimizing unnecessary expenses to pay off bad debt such as credit cards and saving money for a down payment. The hard part is having the discipline to do those things. The trick is to shift your mindset away from instant and temporary gratification spending and focus on the years of pride and joy you will have in your new home. – Chris Bounds, Invested Agents
13. Leverage Digital Solutions To Streamline The Process
For first-time home buyers, using the time leading up to applying for a mortgage to prepare and get organized is key to putting your best foot forward. Get paperwork in order, boost your credit scores and pay off debt. Additionally, home buyers should consider leveraging digital solutions that make the process of getting a mortgage more efficient and automate the otherwise tedious requirements. – Miriam Moore, ServiceLink
14. Save Up As Much As You Can
Work hard to save up a down payment. Down payment assistance programs rob you of so much buying power and most people can save a down payment with some effort. Don’t fall for the trap! – Tony Acosta, Real Team Realty