Buying your first home can be both exciting and scary. It will certainly be the biggest purchase of your life and the mortgage will likely be part of your monthly budget for many years. Although you can handle the process on your own, it can be much easier if you have people by your side.
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Real estate agents are a great resource because they know the local market and the area you want to buy in. However, many people don’t realize that their bank can also be a great source of information and tools to make the home buying process easier.
Read on to learn how you can leverage your bank as a first-time home buyer.
Understanding your credit score
When you start the home buying process, the first thing you need to do is check your credit score to get an idea of whether or not you can get the best possible interest rates.
Most banks now offer access to monthly credit scores from at least one of the major credit bureaus. This gives you insight into your credit score before you decide on a mortgage.
Keep in mind that if you want to take out a conventional loan, you’ll need a credit score of at least 620. If you take out an FHA loan, which is popular with first-time buyers, you can get by with a credit score as low as 500 if you plan on a 10% down payment, or a credit score of 580 with a 3.5% down payment. However, you should aim for a credit score of at least 740 to 760 or higher to get the lowest possible interest rate.
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Use online tools and resources
Most banks have developed robust tools and resources for prospective first-time home buyers. These include affordability calculators to help you understand how much home you can afford and what resources are available to you if you experience financial difficulties after purchasing your home. The goal is to provide you with everything you need for a successful home buying experience.
“Banks often offer educational materials and consulting services to guide first-time buyers through the mortgage process,” said Kwame Darko, founder of KD Buys Houses. “This can include one-on-one consultations, workshops and online tools that explain everything from credit scores and loan types to the entire homebuying process.”
“Accessing these resources can help buyers make informed decisions, avoid common pitfalls, and feel more confident throughout their buying process.”
Get pre-approved
When you’re ready to move forward, it’s a good idea to get pre-approved for a loan. Most banks will allow you to go through the pre-approval process. This allows the lender to closely examine your credit report and finances to make sure you’re a good borrower.
Keep in mind that pre-approval requires a thorough credit check, which will lower your credit score by a few points, but going through this process will save you time when you’re ready to move forward with the application, and it will also show the seller that you’re serious about buying.
“One of the most valuable services banks offer is the pre-approval process,” said Darko. “By pre-approving a mortgage, first-time buyers can set their budget and strengthen their negotiating position. This step not only clarifies the amount of credit they can expect to borrow, but also shows sellers that they are serious and capable of closing the deal.”
“This can be a game-changer in competitive markets where sellers seek the assurance of a smooth transaction.”
Take advantage of first-time home buyer programs
Many banks do their best to give people who want to buy a home everything they need to get started. Chase, for example, offers a homebuyer grant that allows first-time buyers in select areas to get up to $7,500 toward a new home. Additionally, the DreaMaker Mortgage lets you buy a home with as little as 3% down.
One of the worst parts of the home buying process can be how long everything takes from start to finish. Some banks even have programs that give you the peace of mind that the process will go smoothly and you’ll be able to close within the time frame they specify. Nbkc Bank gives both buyers and sellers $2,500 if the loan doesn’t close on time. For eligible products, Chase guarantees you’ll close on time – within three weeks – or they’ll give you $5,000.
“Many banks offer special programs designed specifically for first-time home buyers,” Darko added. “These programs often include benefits such as lower down payment requirements, reduced interest rates, and even grants or subsidies to assist with closing costs. Taking advantage of these programs can significantly reduce upfront costs and make purchasing a home more accessible to those who might otherwise struggle to save a substantial down payment.”
The conclusion
If you’re thinking about buying your first home, there are a few things you need to know to ensure a positive experience. Fortunately, your lender has many resources and programs to make the process as easy as possible.
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This article originally appeared on GOBankingRates.com: 4 Better Ways to Use Your Bank When Buying Your First Home, According to an Expert
