Mindy Jensen from BiggerPockets.com joins me for a fresh bag of popcorn and to help a listener out. Holly wrote in wanting to understand the basics of getting a mortgage and what she and her boyfriend should expect financially when buying their first home.
Meet Mindy Jensen
Mindy is the Community Manager at BiggerPockets.com which is one of the most respected online real estate networking and information resource platforms. She also co-hosts the Bigger Pockets Money Podcast. Mindy has been investing in real estate since 1996 and has her Colorado real estate license.
You can hear more from Mindy on the BiggerPockets Money podcast where she is joined by her co-host Scott Trench.
Finding the Right Mortgage
Mindy suggests before you do anything, start by contacting a mortgage broker. A mortgage broker is different from a lender in that they work for you not the bank. A mortgage broker will shop around for the best mortgage terms that fit your specific needs saving you time and the headache of what can feel like an endless search.
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Know Your Credit Score
As you probably already know, the higher your credit score the better. A credit score of less than 580 will probably prevent you from obtaining any mortgage. Work on building up your credit first before attempting to apply for a mortgage.
If you have no idea what your credit score is try out a site like CreditKarma.com or CreditSesame.com. These services will not provide you with the exact same credit score that lenders use, but it will give you an good idea of where you stand, plus they are free.
If you have a credit card with Discover or Capital One or a bank account with Chase chances are you already have free access to your credit score. The majority of these companies will provide you with your FICO score which is the same score most lenders rely on making it the most accurate.
Submit Your Applications Quickly
Don't just start applying for the first mortgage you come across. Mindy suggests that you wait until you have a several viable options and then submit all of your applications with a week of each other. The reason you will want to do this is to minimize the impact on your credit score.
Each mortgage application you submit will result in a hard pull on your credit score which will ding your credit score slightly. This isn't a big deal if it happens once or twice, your credit score will recover. But if you do this over and over by the time you submit the later applications your score may have dipped enough to cause you to not qualify for the best rates.
Mindy says that by applying for multiple mortgages within about a week of each other that all of those inquiries will just be treated as one minimizing the impact on your credit score.
A Few Final Mortgage & Home Buying Tips
- A mortgage is considered revolving credit and making timely payments can actually cause your credit score to increase.
- Mortgages are typically offered in 15 and 30 year durations.
- Contact a local real estate agent in your area to get a list of properties for sale. This can help you get a feel for local home prices and what to expect when you start your search.
- If you are purchasing a home as a couple, try to limit your mortgage budget to what you can afford on one income. This can help keep costs low and make keeping your home easier in the event that one of you loses their income.