When buying your first home, there are several factors to consider, from what features are most important to the right down payment. Obtaining a home loan can be complicated if you’ve never been through the process before, so preparation is key before signing any documents. Here’s a closer look at how first-time home buyers can make the loan process go smoothly.

How to Prepare for Your First Home Loan

1. Pay Off Any Debts

Obtaining a loan is a complex process that takes your debt-to-income ratio, credit score, and gross wages into account. Your debt-to-income ratio is a calculation used to compare the amount of debt you have with your salary.

Percentage examples of this ratio include 50%, which is considered poor, between 37-49%, which is still risky, and under 36%, which is ideal. Paying off your debts ahead of time can lower this ratio, making it easier for you to get approval.

2. Determine a Budget

While you may be approved for a much higher loan than you actually need, it’s important not to go over your budget. Generally, you should spend no more than 35% of your gross monthly income on housing expenses, so if you make $3,000 a month, your mortgage, HOA fees, and home insurance would be around $1,050 total.

This method allows for you to continue saving for any repairs or problems that develop during ownership as well as budget for other costs of living like utilities, car payments, and retirement savings.

3. Save for the Down Payment

Depending on what type of home loan you’re applying for, you’ll need to have a deposit to put down on the home. FHA loans require a minimum of 3.5% of the total cost of the house as a down payment. In contrast, most conventional home loans require a down payment of 20%, which ensures you’ll get the best rates and loans available.

If you’re ready to buy your first home but aren’t sure where to start, consult Kevin Currier - Loan Officer at CMG Financial - NMLS#1550600 in Chattanooga. With more than 25 years of experience in Alabama, North Georgia, or southeast Tennessee, Kevin will walk you through the home loan process, helping you understand what your options are and how you can get the best rate possible—even on weekends and evenings.To learn more about financial services, visit the loan officer online or call (423) 991-0095.