Mortgage expectations vs reality
Buying your first home is a big and exciting commitment. Despite the anticipation of making your new house a home however, the whole homebuying process can be a little daunting at times. Between navigating the fast-paced real estate market and getting approved for a mortgage, there’s enough involved to confuse even repeat homebuyers. First-time homebuyers actually make up a third of people buying homes in the United States. The median age of those first-time buyers is 32, and their median household income is $75,000.
Luckily, with the right information, getting from open house to closing isn’t as scary as it seems. Here are some common mortgage misconceptions and the reality of each situation:
1. You don’t need to get approved for a mortgage until after you make an offer
Ideally, you should aim to get pre-approved for a mortgage before you even start your home search. Getting pre-approved for a mortgage proves your credibility to the seller of the house you’re making an offer on. This step is especially important in highly competitive housing markets — the top three of which are Denver, Los Angeles, and Portland, Ore. If you’re in Colorado, the team at 5280 lend can help guide you through the mortgage process whether you’re a first time homebuyer or just looking to move.
2. You need excellent credit to apply for a mortgage
Although credit scores vary depending on what type of score you’re checking, generally a score of 800 or above is considered excellent. As of 2017, approximately 20 percent of Americans have an excellent credit score. But don’t worry if yours isn’t quite there. There are things you can do to raise your score, like paying down debt or lowering your overall credit utilization. However, you can still get a good mortgage with a good or very good credit score. Anything above 600 is generally considered the minimum credit score to get a conventional mortgage.
3. You should buy a home that costs as much as you’re qualified for
Even if you’re qualified to buy a home up to 300,000 for example, it’s never recommended to purchase a home at that amount. What you can afford on paper isn’t always the whole picture. Keep in mind that you’ll likely need to make a few repairs or updates, and at the very least add some decor.