By: Edward McCarthy
President: Sell By Owner Listings, Inc.

Tips For First Time Mortgage Users

It's very likely that you will never make a purchase as large as a home purchase. This is a very good reason to prepare for the process as much as possible. The home you purchase will depend very much on the amount of mortgage for which you qualify. As a first time mortgage user, preparing yourself for the home buying process is the best way to set you up for success.

Making the Down Payment

Many first time mortgage users worry about saving up for their down payment and rightfully so. A down payment can mean the difference between getting approved or denied for a mortgage. This is true for first time mortgage users and homebuyers who have obtained a mortgage previously.

The good news is that, for many lenders, you don't have to make as high of a down payment as first time mortgage users have in the past.

First time mortgage users should keep these tips in mind when trying to reach a down payment goal.

• First make sure the goal you are setting for the down payment is a reasonable one. Consider your monthly income and expenses. Use this to decide how much you can reasonably set aside for the down payment. Saving for your home shouldn't cause you to miss your other financial obligations.

• Set aside money for yourself first. Before you pay any monthly bills or other expenses, set aside money for your savings or investment accounts.

• Watch your purchases. Consider every dollar you spend on something you don't need a dollar that could have gone toward your down payment.

Preparing Your Credit

As a first time mortgage user, it is a good practice for you to begin watching your credit as soon a home purchases has been decided. Your credit history will be one of the primary factors used by prospective lenders to determine your eligibility for a mortgage.

Past credit problems won't disqualify you for a mortgage. Many lenders work with first time mortgage users that have less than perfect credit.

Even if you have had credit problems in the past, you can begin repairing your credit to look more favorable to lenders. Start by disputing inaccurate and outdated items from your credit report. You can also pay down some of your debt to improve your credit history.

Income vs. Debt

To determine how much first time mortgage users can borrow for a mortgage, lenders compare your income to the amount of debt you have. In general, lenders look for first time mortgage users to spend less than 35% of their monthly income to pay for monthly debt and housing expenses.

The lower the percentage of income you spend on debt, the better your chances at obtaining a loan. Avoid increasing your debt by making large credit purchases before applying for a first time mortgage.

You don't have to be intimidated by the first time mortgage process because you are a first time mortgage user. Being prepared with the knowledge of the lending process will ease some of the qualms you have about applying for a mortgage.

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