My First Car Loan

Getting ready to purchase your first home? If so, be prepared to very quickly be educated on a process you may only go through a couple of times in your lifetime. Buying a home can be a complicated experience, and without a professional to guide you through it, you may be clueless about if you are doing things correctly. Here are some things you should know as a first time home buyer.

Get Pre-Approved For A Mortgage

A common mistake that many first time home buyers make is not getting pre-approved for a mortgage. This may be due to pre-approval letters not being valid after a certain period of time, and not knowing when an offer on a home will actually be made.

The problem with not getting a pre-approval is that it can play a key role in the offer process. The pre-approval letter states in basic terms how much a mortgage lender is willing to lend to you for a home. If the owner is picking between a few offers, they may end up going with the offer that looks like it has the best chance of being approved by the lender. Having a pre-approval will help demonstrate that you won't run into an issue where the mortgage lender denies your loan in the end or doesn't offer you enough money, which can cause you to back out of the sale and waste time.

Lower Your Debt-To-Income Ratio

Mortgage lenders will look at something called your debt-to-income ratio when determining if you can get a loan. This is the amount of money that you owe each month debts, which is divided by how much money you bring in each month. If the debt-to-income ratio is too high, you may not be eligible for a loan.

The debt-to-income ratio is based on how much you owe each month, not necessarily how much is left to pay off for each debt. If you need to lower your debt-to-income ratio, try paying off some of those debts that you're close to paying off in their entirety. This will immediately make your credit report look much better in the eyes of a lender. 

Check Your Credit Report

It can take a while to clean up a credit report, especially if there is incorrect information on it. Pull your credit reports way before you plan to purchase a home. This will give you plenty of time to have incorrect information taken off your credit report so it looks better to a lender. 

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