Top 3 Tips for First-time Home Buyers by ISPC Financing
Consumer financing firm ISPC Financing started the business with homeowners’ loans before expanding their scope to other consumer lending products. What this means is they have the knowledge and expertise to provide borrowers with solid information regarding home loans. ISPC Financing shares tips for first-time home buyers in this post with the goal of helping them own their dream house without hurting their long-term finances.
Top 3 Tips for First-time Home Buyers
1. Check your credit score
Your credit score can affect your application in two ways. First, a low credit score or poor credit history could mean higher interest rates on your mortgage loan. Usually, a score of 750 and up is deemed well, while 850 and up is considered excellent. ISPC Financing mentions that if you have a low credit score, you should seek to improve it first before applying for a loan to increase your chances of getting one with a reasonable interest rate.
Secondly, your credit score could ultimately mean you won’t be approved for the loan at all. So, before shopping for a house and a lender, improve your credit score first. You can do this by lowering the balance on your credit cards, ensuring that you pay all your bills on time, and occasionally pay higher than the amount due.
2. Have money in the bank
Lending companies like ISPC Financing don’t want to see you losing your home because of foreclosure. This is why they strongly advise future borrowers to have money in the bank before applying for a mortgage loan. Generally, you should have at least 20% of the total purchase price of the house you’re looking to buy saved in the bank. This can serve as your buffer in case your financial situation changes for the worse. Additionally, it would be ideal to put a considerable down payment on the house (a minimum down payment is around 3-3.5% of the total purchase price) to avoid mortgage insurance.
ISPC Financing adds that a down payment of less than 20% of the total purchase price will require mortgage insurance (PMI or FHA, depending on whether the lender is private or federal/government). This gives the lender a layer of protection in the event of a foreclosure (so they won’t lose money).
3. Determine a budget first
What ISPC Financing has found over the years of being in the lending business is that most borrowers work on their budget only after securing the loan, be it a mortgage loan or something else. This is a huge mistake because borrowers overlook one very important factor: their financial situation could change over time. Instead, ISPC Financing advises borrowers to work on their budget first and then look for a house that fits that budget. Consider such factors as your income outlook for the next two to three years, ability to pay taxes and insurance on top of your mortgage, and how your financial situation will change over time (unexpected pregnancy, medical emergencies, etc.).
In the end, how you manage your finances and budget will affect your eventual ownership of the house.