Get Financing For Your First Home
Get Pre-Approved
The first step in financing your first home is to get pre-approved. During this process, you’ll submit some preliminary information to get a quote on how much large of a mortgage you can afford. While this step is essential for financing your first home, it also gives you a realistic idea of how large of a mortgage you can afford. This will help you narrow down your search.
Find a Home & Make an Offer
Now it’s the fun part: house hunting! You’ve probably done some searching, but now that you know exactly how much you can afford, it’s time to narrow down your search. Once you find the home you love, make an offer. Negotiations are common, so talk to your realtor to determine the best strategy for this step of the process.
Close on Your First Home
After your offer has been accepted and all of the required deposits and documents are submitted, it is time to close on your first home. The timeline for your closing will depend specifically on the terms in your purchase agreement. For some first-time buyers, this process is just a couple of weeks, and for others, it can be up to 45 or 60 days.
Types of Financing for First-Time Home Buyers
Conventional Loans
Conventional loans are the most popular type of mortgage. These loans come from traditional lenders, such as banks, credit unions, or similar financial institutions, and they are not backed by the government.
The criteria for conventional loans vary from lender to lender, but you typically need to have a credit score of at least 620 and a debt-to-income ratio of less than 36%. The most flexible conventional loans allow down payments of as little as 3%, but having a larger down payment is favorable.
Some types of conventional include fixed-rate mortgages and floating rate mortgages. Fixed-rate mortgages are a safer way to go since you don’t have to worry about unexpected increases to your monthly payment.
FHA Loans
The Federal Housing Administration (FHA) is a government program that is designed to make financing more accessible to first-time home buyers. These loans are known for their very small down payment requirements.
FHA loans are offered by private lenders, but they are backed by the government.
Although these loans make it possible to buy a house with as little as 3% down, they require buyers to stay in that home as a primary residence until the loan is paid off or refinanced. FHA recipients are also required to pay mortgage insurance.
VA Loans
The U.S. Department of Veterans Affairs provides assistance for veterans who want to buy a home. These are called VA loans, and they are known for small down payment requirements and flexible credit requirements.
VA loans are for active members of the military, those who have been honorable discharged, past military members who have met minimum service requirements, spouses of deceased military members, and some members of the National Guard or Selective Reserve.
Like FHA loans, VA loans are loans offered by private lenders, but they are backed by the government.
Financing First-Time Home Buyer FAQs
We’ve covered a lot of ground, but since financing your first home is a complex process, you likely have some more questions. Luckily, we have the answers you’re looking for. Here are a few questions that many first-time home buyers have as they finance their first home.
As you look for a lender, it is important to find someone who you can trust. There are a few ways to confirm legitimacy as you conduct your search.
The first is to work with a reliable mortgage broker. This sort of professional knows the ins and outs of first-time home buyer financing, and they can both represent you and guide you throughout the process.
Some other options are to get referrals from friends and family or to read reviews of local lenders. Word of mouth is a great way to find reliable lenders because people are unlikely to recommend businesses that they were not happy with.
The best type of mortgage for first-time home buyers depends completely on each buyer’s unique situation. What works best for you may not be an option for someone else.
Book a spot on our calendar, and we can help you determine what the best type of mortgage is for you.
There is no precise limit on how much a first-time home buyer can borrow. Your unique limit will be calculated based on your income, debt, and monthly expenses. Your credit score may also play a role in this calculation.
Your mortgage broker will crunch some numbers to help you determine how large of a mortgage you can afford.
There are a variety of different programs available to help first-time home buyers. These range from government-backed down payment assistance to privately sponsored educational resources.
Contact us, and we can discuss which options are available to you.