Applying for your first mortgage is an exciting time in any adult’s life. You’re finally about to be a homeowner, which is something many people only dream of.

It’s a fantastic time to buy a home. Mortgage interest rates are the lowest they’ve been in a long time, and many states offer first-time-home-buyer exceptions and deals.

But the thing is, first-time home-buying can be scary. Maybe you’re overwhelmed at the process or don’t even know where to start. Or maybe you’ve had credit problems in the past and you’re afraid those will hinder your ability to buy a home.

We’re here to help. Here are 5 tips for how to apply for your first mortgage.

1. Know Your Credit Score

Your credit score tells a potential lender a lot about you. It gives them an idea of how you’ve handled the money you’ve borrowed in the past and helps them calculate risk. The higher your score is, the more likely you are to get a favorable interest rate on your first mortgage.

But the opposite is true, too. Getting a home loan with bad credit can be challenging (although it is doable). Some companies may decline your application while others may require you to put a lot upfront or ask for a cosigner.

Either way, it’s a good idea to enter negotiations with knowledge of your credit score. This allows you to plan how your strategy for talking to lenders and to know where you stand.

It could also be an incentive to wait If your credit score needs some work and you aren’t rushing to get into a home, maybe you pay off a credit card or two or take care of student loans. Revisit this in six months and see if you can get a lower interest rate.

2. Put At Least 20 Percent Down 

Many Americans are what’s known as “house poor.” This means that 30 percent or more of their take-home monthly income goes towards their mortgage.

There’s no other way to say it: don’t put yourself in that situation. Being house poor is a lot of people’s “normal,” but it doesn’t have to be yours.

30 percent might not sound like a lot until you factor in car payments, utilities, loans, business expenses, and other things you have to pay. One-third of your income is a substantial amount to be wrapped up in your home.

As a first time home buyer, it’s a good idea to save up and put at least 20 percent down on the home. This helps make your monthly payment more affordable and even might qualify you for lower first time home buyer mortgage interest rates.

Find a mortgage calculator online and determine your budget based on the numbers. If you can afford to put more down on the home, do it. Don’t tie up too much of your liquid assets in the house, though—otherwise you might run into trouble if you need quick cash down the road.

3. Track Mortgage Rates

It’s a good time to buy a home! The coronavirus pandemic has led to very low mortgage rates, and homes in suburban and urban areas all over America are being scooped up left and right.

That’s why it’s important to keep track of current mortgage rates as you go through this process. This information can be used to negotiate with lenders and help you get the best deal. Being prepared could save you a whole lot of money over thirty years!

4. Find a Home You Can Grow Into

If this is your first mortgage, you’re probably somewhat young—in your twenties or thirties. Regardless of your age, it’s important to think about the future when buying a home. Buying a home you outgrow is not only time-consuming, but it’s also bad business.

As a general rule, you should keep your home for a minimum of two years before selling. (And actually, closer to five is a better number.) This helps you build up equity in your home so that you can sell at a profit or break even.

Selling a home too quickly—especially in a non-buyers market—could cause you to lose some of your equity. It’s also not a great sign to future lenders that you’re the best person to loan to.

Take some time to assess your family situation. Do you want kids? Are you single but hoping to be married? Shop with these things in mind so that you don’t wind up buying a burden that you need to get rid of quickly.

5. Organize Your Documents

Buying a home is a lot of paperwork. If you’re applying for your first mortgage, be sure to get all necessary documents in order.

This is good for a few reasons. One, it simplifies the process for you. Secondly, lenders may be more apt to work with you on financing options if you’re neat and organized. Doing a little work ahead of time can really go a long way.

Documents you’ll need when applying for a mortgage include proof of income, tax returns, and bank statements. If you or your spouse are self-employed, be prepared to have your income thoroughly investigated. Lenders need to see that you have the means to pay back the money you borrow.

Getting Your First Mortgage

Getting your first mortgage is an exciting time. To set yourself up for success, be sure to prepare for your sit-down with lenders and make appropriate financial decisions.

Knowing your credit score and having the necessary paperwork makes you easy to work with. Putting enough money down and planning for the future will help ensure your dream home doesn’t become a nightmare. In the end, it’s really all about preparation and intentionality.

For more real estate advice, click around on our website. Happy buying!