Purchasing a home is one of the most significant financial undertakings you’ll ever make. For first-timers, it’s important to ensure that you’re making wise decisions, all while keeping the process as smooth and as streamlined as possible.

But what steps does this process entail, exactly? Here’s a brief rundown, including some of the key actions first-time homebuyers should take as they try to get their home loan lined up.

Start by Reviewing Your Financial Health

It’s easy to start casually looking at local real estate listings, and before you know it fall head-over-heels in love with a house—but wait! Before that happens, make sure you’re actually in a good place, financially, to take out a mortgage loan.

• Remember that, with most home loans, you’ll need to make a down payment—usually around 20 percent of the home’s total value. Do you have a nest egg tucked away?
• It’s also wise to have a small emergency fund on hand, just in case you have a home maintenance emergency—for example, an HVAC unit that goes out. Even $1,000 in the bank can help defray these unexpected costs.
• Finally, look at your monthly budget, and see how much wiggle-room you have for monthly mortgage payments. A good rule of thumb: Your mortgage payment shouldn’t exceed 35 percent of your monthly income.

Clean Up Your Credit History

The terms of your mortgage loan will largely be determined by your credit history—so before meeting with lenders, it may be advantageous to clean up that credit history.

– If you have a lot of outstanding debts, try to pay them down as much as can. Pay off smaller debts completely, then tackle the larger ones.
– Make sure your bills are all paid on time, as late payments can ding your credit history. It may be beneficial to set up automated payments whenever possible.

Meet with Lenders

It’s always wise to shop around for a mortgage. Contact two or three different lenders and ask them about current interest rates. They may wish to talk with you about your financial history, and that’s fine, but make sure they don’t obtain your credit score until you’re ready to move forward. Too many checks on your credit score can actually cause it to decline.

Find a lender who offers competitive interest rates, but also someone who is knowledgeable and helpful, and with whom you feel comfortable. Don’t be afraid to trust your gut on this one!

Once you find that lender, ask about the process of getting pre-approved for a mortgage. That way, once you do find the home you want to purchase, the process of obtaining your home loan will be much smoother and quicker.

With these steps, you’ll be ready to make prudent financial decisions, and to be smart about your home purchase. To learn more about the best policies for first-time mortgage seekers, don’t hesitate to contact our Los Angeles home loan team today!