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15 Mortgage Tips for First-Time Homebuyers

If you’re buying your first home, you need to know certain things about the mortgage process.
Consider these tips

If you’re in the market for your first home, the process may seem pretty daunting, especially getting your first mortgage. However, the more you know about mortgages, the better prepared you’ll be, so here are 15 things you should know that can get you ready for the application process and possibly save you money.

  • Know your credit score and what it means to your mortgage
    Your credit score can make a big difference in how much home you can afford and how much interest you’ll end up paying. Before you start the homebuying process, it can be a good idea to check your credit report and to do damage control if necessary.
  • Estimate how much you can borrow
    Lenders generally use two different debt ratios to determine how much you can borrow. The short version is that your monthly housing payment (including taxes and insurance) should be no more than 28% of your pre-tax income, and your total debt (including your mortgage payment) should be no more than 36%. The ratio that produces the lower payment is what the lender will use. Many lenders have more generous qualification ratios, but these are traditionally the most common.
  • Don’t overextend yourself
    If qualify for a certain mortgage amount doesn’t mean that you have to max out your budget. Be sure that your new mortgage payment not only fits your bank’s standards but your budget as well.
  • Get your documentation in order
    When you apply for a mortgage, you’ll need to document your income, employment situation, identity, and more, so it can be a good idea to start gathering the necessary documentation before you walk into a lender’s office.
  • Get a mortgage pre-approval before you start shopping
    To be clear, you don’t need a pre-approval to start looking at houses. However, since a pre-approval is essentially the same as a full mortgage approval, just without a specific home in mind, it can be an extremely valuable shopping tool. Specifically, if you submit a pre-approval along with your offer, it tells the seller that you’re a serious buyer who is not likely to run into trouble when obtaining financing. One caveat: A pre-approval and pre-qualification are two different things. A pre-qualification is based solely on the information you provide and is not a commitment to lend money, therefore it doesn’t carry nearly as much weight.
  • How much of a down payment do you have?
    The mortgage industry standard is a 20% down payment. However, you may be able to get a conventional mortgage with significantly less money upfront — as low as 5% of the purchase price in many cases. The point is that while a higher down payment will lower your monthly housing costs, you may be able to get into a home with less money in savings than you think.
  • Closing costs don’t have to add to your out-of-pocket expenses
    Generally speaking, you can expect closing costs to be in the neighborhood of 2%-3% of your mortgage principal amount. So, on a ₦20,000,000 mortgage, you can expect a bill of up to ₦600,000 that must be paid when you get the keys.
    However, it’s perfectly acceptable to work seller-paid closing costs into your offer to reduce your out-of-pocket expense. In other words, if you want to offer ₦19,500,000 on a home, you can offer ₦20,000,000 and ask the seller to pay up to ₦500,000 in closing costs for you. This can be an excellent strategy for first-time buyers with limited savings to improve their ability to get a mortgage.
  • Consider an NHF loan if your credit history isn’t great
    Another option is the NHF mortgage, which is designed for borrowers with qualifications that don’t meet the standards of conventional lenders.
  • Budget for mortgage insurance, if necessary
    If you put less than 20% down on your mortgage, you’ll probably have to pay private mortgage insurance or PMI, so be sure to budget for this when shopping. Mortgage insurance rates can vary significantly, depending on your credit, the length of your mortgage, how much your down payment is, and other factors. However, it can add a significant amount to your payment, so be sure to consider it.
  • Shop around for a low rate
    One common mistake among first-timers and repeat buyers alike is accepting the first mortgage that’s offered. A seemingly small difference in rates can save you money for a 30-year mortgage, and as long as all of your mortgage applications take place within a short period, the additional inquiries won’t hurt your credit score.
  • Don’t forget about smaller lenders
    When you’re shopping around, don’t just check the big national mortgage lenders. Some regional or local banks may offer unique lending programs, especially for first-time homebuyers.
  • Consider a 15-year mortgage
    If you can afford the higher payments or are willing to buy a less expensive home, a 15-year mortgage can save you hundreds of thousands of nairas in interest and can allow you to own your home free and clear in half the time. Fifteen-year interest rates are about one percentage point lower than 30-year rates, and you might be surprised how much the combination of a lower rate and shorter amortization period can save you.
  • Fixed or adjustable?
    For the majority of homebuyers, a fixed-rate loan is the best choice, especially in a low-interest environment. However, if you don’t plan on being in the home you buy for more than a few years, an adjustable-rate mortgage could save you thousands of dollars in interest.
  • Expect a few hassles before closing
    In a perfect world, you could apply for a mortgage, have the home inspected, and show up at the closing table a month later to wrap things up. Sometimes that happens, but it’s rarely that easy. More often than not, there are some hassles along the way.
  • After you apply, don’t use your credit until you have the keys in hand
    It’s a good practice not to use your credit for anything out of the ordinary between the time you’re approved for your mortgage and when you close on the home.

How to access the National Housing Fund (NHF) Loan


  • Any Nigerian above the age of 18
  • The applicant must be a contributor to the National Housing Fund for a minimum period of six months.
  • The applicant must have satisfactory evidence of a regular flow of income to guarantee loan repayment.


  • The loan shall be for the purpose of building, purchasing or renovating a residential accommodation
  • No loan shall be for refinancing


The applicant is to apply through a duly licensed and accredited mortgage loan originator (MLO) of his/her choice and not directly to the Federal Mortgage Bank of Nigeria (FMBN).

The MLO of the applicant’s choice must be accredited by FMBN to access the NHF facility. Application forms for NHF loans are obtainable from the MLO


  • The property for which the loan is sought shall serve as security for the loan.
  • The property shall conform to the existing planning laws and regulations (approved building plan).
  • The property shall possess sufficient value to recover the loan.
  • A mortgaged property shall be insured against hazards
  • The loan shall be secured by the first legal mortgage of the property between the applicant and the mortgage loan originator and assigned to FMBN.


  • Open a savings account with a registered PMB
  • Contribution to the fund for at least six months prior to application.
  • Have satisfactory evidence of the regular flow of income to guarantee the loan.
  • Submit photocopies of valid title documents (e.g. C of O).
  • Approved survey/site plans
  • Approved building plans
  • Priced Bill of Quantities where applicable
  •  Valuation report prepared by a firm of registered surveyors and valuers where applicable
  • Three years tax clearance certificate
  • Letter of consent to mortgage to your chosen PMB
  • Completed prescribed mortgage loan application form
  • Evidence of NHF participation
  • Copy of payslips for the previous three months
  • Equity contribution of personal stake of 30 percent, 20 percent or 10 percent depending on the loan amount applied for loans of N15 million, N10 million and N5 million respectively
  • Offer letter/Acceptance and Allocation letter (in case of government projects)
  • In the case of a registered self-employed applicant, a copy of Articles and Memorandum of Association and a copy of Certificate of Incorporation as evidence of employment status must be submitted.


  • A borrower is entitled to a maximum loan of fifteen million nairas (N15, 000,000.00) or as determined by the Bank.
  • No individual should be given a loan in excess of 90% of the cost or value of the property to be mortgaged.

Equity contribution based on the new loan amounts is as follows:

  • N15,000,000.00 – 30%
  • N10,000,000.00 – 20%
  • N5,000,000.00 – 10%


The interest rate shall be as prescribed by the National Housing Fund Act which is not more than 6% p.a.

The maximum repayment period shall be 30 years. The individual borrower shall make repayment through the mortgage loan originator through which they obtained the loan.

Mortgage Refinancing and its Benefits

1000 and 500 naira denomination notes

Refinancing your mortgage can help you save money (or at least lower your payments), but sometimes it’s just an expensive mistake. If you’re considering refinancing, study up before you pull the trigger.

What is Mortgage Refinancing?

A refinancing transaction happens when you swap out an old loan for a new (ideally better) one. Your new loan pays off the old one, and you start making payments to the new lender.

Benefits of Refinancing

A new, properly structured loan can improve your financial situation. In particular, you can:

  • Lower your monthly payment
  • Lower lifetime interest costs
  • Reduce risk, if you have an adjustable-rate mortgage
  • Get cash out for other purposes
  • Consolidate debt and possibly get tax benefits

Costs to Refinance

Of course, mortgage refinancing is not free. You’ll pay fees to your new lender to compensate them for offering the loan. You may also pay for legal documents and filings, credit checks, appraisals, and more.

Even if a loan is advertised as a “no closing cost” loan, you’re paying those fees (even if you don’t notice them). Generally, this happens through a higher interest rate.

Does Refinancing Make Sense?

You need to weigh the pros and cons of your old loan and a new loan to decide. In general, mortgage refinancing is a good move when you can save money by locking in a lower interest rate or payment, shorten your loan term, or restructure debt optimally.

Once you understand the costs, evaluate how much you’ll save over time and how long it will take to recoup any up-front costs associated with mortgage refinancing. Will you keep the loan (or live in the home) long enough to make it worthwhile?

One way to look at this is with a basic break-even analysis – when will you come out ahead? But there is a lot more to consider.

When It’s a Good Idea

Mortgage refinancing is a good idea when you’ll truly benefit from a new loan. Some clues that it might be a good idea are:

  • Interest rates are low
  • Your credit has improved since you got your first loan
  • You will keep the loan for a long time
  • You can avoid getting stung by a high-risk mortgage
  • You can get an amortizing loan instead of an interest-only loan

When It’s a Bad Idea

You should avoid refinancing your mortgage if you’ll waste money and increase risk. Sometimes having a lower interest rate and monthly payment can cost more in the long run – even if they help you today. You also need to be sure you can recoup all the fees before you pull the trigger.

Things you need to consider before taking a mortgage

It’s harder to qualify for a mortgage loan these days. New regulations require lenders to verify every aspect of a borrower’s financial background, before making the loan.

As a borrower, you should avoid doing anything that might harm your chances of getting approved for a loan.  Learn what to do before applying for a mortgage.

Credit score

A mortgage is a big responsibility. The bank risks a lot of money and must be cautious in giving out loans. A good credit score will be a plus in getting a mortgage.

Your Budget

Mortgage lenders want to make sure you don’t borrow too much. They look at how much your mortgage payments are relative to your income, ensuring you can pay. Run your own mortgage calculations to understand what you can afford.

First-Time Buyers

If you’re a first-time homebuyer, you may qualify for a special mortgage. Sometimes these are extremely valuable, and sometimes they’re not. Make sure you are familiar with these programs and restrictions on these mortgages.

Other Mortgages

There are a wide variety of mortgage options out there. You may find that some of the most creative ones (like interest-only, negative amortization, and adjustable-rate mortgages) work best for you. These mortgages might work for self-employed individuals with unpredictable (but sufficient) income, real estate investors, and buyers with a specific plan that fits these loans. However, you can also get yourself in trouble, so it pays to learn about the risks of each type of mortgage.

Second Mortgages

A second mortgage allows you to borrow against the value of your home. You can get access to a large line of credit with an attractive rate, though there are some pitfalls.

Down Payments

It’s possible to get a mortgage without a 10 percent to 20 percent down payment. Some people get a mortgage with no money down. There are a few legitimate programs allowing you to get a mortgage with very little down. Get acquainted with some of the safer mortgage programs out there.


There may come a time when you can get a better mortgage. Perhaps mortgage rates have changed, or your credit improved. Refinancing a mortgage is a powerful move when done for the right reasons.