APM BLOG

Have you been dreaming about homeownership? Maybe now is the time to join the world of homebuyers! We can help you decide if buying a home now is an option for you with tips for first-time home buyers, helpful programs and resources, and more. Here’s what else you need to know in order to take that first step in your home-buying journey:

What First-Time Home Buyers Need to Know:

Know What Your Credit Score Means

A credit score measures your credit risk compared to the rest of the U.S. population and it’s based on your credit usage history. The credit score most widely used by lenders is the FICO® score, developed by Fair, Issac and Company. This 3-digit number, ranging from 300 to 850, is calculated by a mathematical equation that evaluates many types of information from your credit report. Higher scores represent lower credit risks, which typically mean better loan terms.

It’s a good idea to check your credit score before you start your home purchasing plans. That way there are no surprises. Your score can be requested for free from the credit reporting agencies. If your score is low, you can take some time to address the reasons for that and bring your score up before applying for a loan. Your loan professional can help you determine the minimum score you will need for your particular loan program.

Know Why a Mortgage Pre-approval is Important

A mortgage pre-approval is the process of determining how much money you will be eligible to borrow before you begin shopping for your home. You’ll provide the necessary documentation, your credit score will be checked, and you’ll decide what type of loan program will be the right fit for your needs.

The pre-approval has benefits for first-time home buyers. If there are any possible hiccups in your loan process, those will come up now and can be addressed ahead of time. The pre-approval also tells you what size loan you can qualify for which gives you a price range to keep in mind as you begin your home search. You won’t waste your time looking at homes that you can’t afford. And when you make an offer on your dream home, having a pre-approval in hand makes that offer more attractive to the seller, increasing your chances of winning the bid.

Know How Monthly Payments Will Impact You

When you get your new home loan, there will be monthly loan payments. When you find out how much of a loan you qualify for, you’ll know what the expected payment amount will be. It’s important to understand everything that might be included in that monthly payment and how it will impact your finances. Be sure to refer to our Mortgage and Home Loan Glossary to help you understand any payment terms you are unfamiliar with.

Monthly Mortgage Payment Includes:

• Principal:  The portion of your payment that goes toward the principal will be very low in the beginning and continue increasing as time goes by. Toward the end of your loan term, a much larger portion of your payment will be applied to the principal balance.
• Interest:  Your payment will mostly go toward interest costs in the beginning of your loan term. As time goes by, less and less of it will go to interest and be applied to principal instead.
• Taxes:  You can either pay your property taxes separately, or you can set up an escrow account with your lender and have a monthly amount added to your payment to cover your annual property taxes.
• Insurance:  You can either pay your homeowners insurance policy separately or have a monthly amount added to your mortgage payment to cover the annual cost.

If you are approved for a loan amount, you should decide whether you can truly afford the monthly payments. When you qualify for a loan, some of your monthly spending is not taken into consideration. How much do you spend on food, car payments, clothing, gifts, charitable donations, etc.? And if you choose not to add the property taxes and homeowners insurance to your monthly payments, you still need to consider those expenses in your monthly mortgage costs. Can you afford to make the monthly payments and still have enough money left over to meet your monthly obligations? You can work with your lender to decide on the right monthly payment and the right loan amount for your needs.

American Pacific Mortgage isn’t just here for you once you need a home loan. We have friendly and helpful loan advisors standing by to answer your questions, help you take the steps to get ready for a home purchase, and make the first-time home buyer experience a little smoother. Contact us today - we’re here to help!