Benefits Of Being A First
Buying a home is still considered a key aspect of the American dream. As a first-time buyer, you have access to state programs, tax breaks, and federally backed loans if you dont have the usual minimum down paymentideally, 20% of the purchase price for a conventional loanor are a member of a certain group. And you may qualify as a first-time buyer even if youre not a novice.
The Ins And Outs Of This Important Part Of The Home Buying Process
This is Part 2 of a 5-part series in our first-time house buyerâs guide. Just joining in? Start here.
The funds for the down payment are in your savings account. Congratsâyouâve cleared the first big hurdle of home buying. And now youâve begun fantasizing about stainless steel appliances and a sun-filled sitting room. But hold on: Before you start touring homes, tackle the next âto doâ on that list of requirements to buy a house. Itâs time to apply for a home loan and learn how that affects your savings.
Understanding the mortgage application process and going into it prepared can help you get the lowest interest rate, which can help you save money over time.
Qualify to buy a house
A mortgage is a loan that a bank or mortgage lender gives you to help you buy property. Unless you have enough money stashed to pay solely in cash and upfront , getting a mortgage is a key step to buying a house.
Hereâs what youâll need to do:
Prepare necessary documentation
First up? Get a big folder. Having all of your paperwork together before you reach out to banks or mortgage lenders will save you the hassle later. If youâre purchasing a home with a spouse, partner or significant other, make sure you have these forms for both people:
Shop mortgage lenders
Consider a mortgage co-signer
Get pre-approved
Take advantage of the mortgage interest deduction at tax time
In Part 3 of the series, find out what to look for when buying a house and the best time to buy.
How To Find First
As a first-time home buyer, coming up with cash for the down payment and closing costs is one of the biggest hurdles.
Luckily, there are grants and loans available to help home buyers become homeowners.
The best way to determine if youre eligible for a first-time home buyer program is to reach out to the housing authority in the town or city where you want to purchase a home.
Down payment grants, tax credits, and closing cost assistance generally are not advertised, so be sure to ask around.
- Your real estate agent could help you find local grant programs. An experienced Realtor has likely worked with other borrowers who need a little help to get into their new home
- Your loan officer can also help you find down payment and closing cost assistance. In particular, they can suggest programs the lender is willing to work with and has used in the past
- If you work in the public sector, ask your employer. In some areas, nonprofits have grant programs or tax credits to help law enforcement officers, teachers, or emergency medical technicians, for example
Many grant programs are income-based, and many require borrowers to take a homebuyer education course to learn about homeownership and mortgage borrowing.
You may have to do some digging on your own to locate resources available to you.
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How To Find Programs You May Be Eligible For
- Fire up your browser. Make a few different passes at an online search. First, type in the name of your state with the phrase “first-time homebuyer program” and then again with “homebuyer program.” You should get results that send you to specific pages at your state’s Housing Finance Agency. Then repeat the exercise, plugging in your county to see if there are local programs available.
- Sit down with a lender who specializes in first-time buyer programs. Not all lenders are authorized to offer FHA-insured loans. And not all lenders are up to speed on how the 3% down payment for conventional mortgages work. Ask friends, family and real estate agents for recommendations of lenders that close a lot of mortgage deals for first-timers and that have experience adding state or local grants or loans to help get the deal done.
How To Qualify For Down Payment Assistance
Just as for grants, down payment and closing cost assistance is often offered by local and state housing authorities. Again, qualifications vary. Look for income and home sale price caps here, too.
Don’t be surprised if a first-time home buyer class is required to qualify for a grant or down payment assistance. These classes are designed to help you navigate the homebuying process, and can be a good idea to take whether they’re mandatory or not.
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Down Payment Options For First
If you are purchasing a home its important to know where your down payment can come from. Mortgages are subject to all of the laws and regulations the federal government sets for financial institutions.
Your down payment can come from the following sources:
- Checking Account
We Continue To Guide You
Well tell you what to have ready to help your loan closing go smoothly. Well remind you of required steps, plus well let you know what you can expect to pay in closing costs.
Whats more, you can easily manage documents and track your application with our simplified online application its available for most loans. Ask us for details.
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How Much Down Payment Does A First Time Home Buyer Need
There are many down payment options available for first time home buyers. First time home buyers are not required to make a 20% down payment on a home, unless they choose to do so. In fact, many homeowners are approved for mortgages with down payments below 10%. There are many first time home buyer mortgage programs that offer a minimum down payment as low as 3.5%. There are also low and no down payment mortgage loan options available for first time home buyers. Some of the loan programs that offer these attractive down payment requirements are FHA loans, USDA loan, VA loans and specific conventional loan programs from Fannie Mae and Freddie Mac.
Our Advice Its Never Too Soon To Pre
The best time to get pre-approved is when you start thinking about homes. Pre-approved home buyers get better rates and better homes.
Getting pre-approved establishes your home purchase price range and minimum down payment and gives you time to edit and correct your credit.
Most importantly, though, pre-approvals indicate seriousness about buying a home.
Get pre-approved today in under 3 minutes.
Get pre-approved for a mortgage today.
Dan Green
Dan Green is a former mortgage loan officer and an industry expert. He’s appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat.
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Benefits Of An Fha Loan
- Easier to Qualify FHA provides mortgage programs with lower requirements. This makes it easier for most borrowers to qualify, even those with questionable credit history and low credit scores.
- Competitive Interest Rates FHA loans offer low interest rates to help homeowners afford their monthly housing payments. This is a great benefit when compared to the negative features of subprime mortgages.
- Bankruptcy / Foreclosure Having a bankruptcy or foreclosure in the past few years doesn’t mean you can’t qualify for an FHA loan. Re-establishing good credit and a solid payment history can help satisfy FHA requirements.
- Determining Credit History There are many ways a lender can assess your credit history, and it includes more than just looking at your credit card activity. Any type of payment such as utility bills, rents, student loans, etc. should all reflect a general pattern of reliability.
After learning about some features of an FHA mortgage, undecided borrowers often choose FHA loans over conventional loans because of lower down payment requirements, better interest rate offerings, and unique refinance opportunities.
The Mortgage Revenue Bond Assisted Program
THE MRB program helps home buyers who are at 80%AMI or less and dont have enough money to meet down payment and closing cost requirements. It offers below market interest rates as well.
MRB Benefits:
A Homebuyer grant is a program targeted at Louisiana first-time homebuyers to help them cover the cost of their down payment and/or closing costs.
Not all grant programs are free and most come with either a second mortgage attached to your primary mortgage or an increased interest rate on your primary mortgage.
- Down Payment Assistance between 5%-9% of the loan amount.
- Reduced Mortgage Insurance on Conventional Loans
MRB Requirements:
- Must be a first-time homebuyer
- The property must be in Louisiana
- Must meet income requirements
- Minimum credit score of 640
The MRB down payment assistance program is a soft second lien attached to your home. The amount of the lien is equal to 4% of your mortgage loan amount.
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Fannie Mae Conventional Loan
- Minimum credit score: 620
- Minimum down payment: 3%
- Other requirements: Private mortgage insurance for down payments less than 20%
The Fannie Mae conventional mortgage is one of the most common types of mortgages in the US, with 30-year fixed mortgages and 15-year fixed mortgages being some of the most popular. It is not backed by the government like an FHA loan, but instead is backed by banks and the lenders themselves. A conventional mortgage allows you to put as little as 3% down. You’ll also need to purchase private mortgage insurance if you put less than 20% down. You can cancel your mortgage insurance once you reach 20% equity in your home.
To qualify, you need a credit score of at least 620 for fixed-rate and 640 for adjustable-rate mortgages. Keep in mind, the conventional loan limit for a single unit in the US is $647,200.
Ways To Get Approved For A Home Loan The First Time
Are you in the market for a home loan in the new year? Whether you are buying your first home or refinancing your existing one, you can improve your odds of being pre-approved for a home loan this year if you follow our helpful tips below.
With the economy soaring, lenders have eased credit rules and down-payment requirements on many home loan programs.
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Check Your Credit Score
Its important to check your score before you apply for your first mortgage. Experts recommend that your score should be at least 680 to qualify for a first time home loan however, every situation is unique, and there are instances where you may be approved for a home loan with a score below 680.To check your report, visit annualcreditreport.com. Currently, Equifax, Experian, and TransUnion are offering free weekly reports.
Down Payment Requirements For First
There is no required down payment to buy a home in Louisiana. There are programs such as USDA Rural Development and VA Loans, that dont require a down payment. They are 100% financing. You can also look into homebuyer grants, that will provide your down payment for a higher payment, or second mortgage.
If you choose to use a program that does require a down payment, the minimum down payment ranges from 3% to 3.5%.
Your down payment is going to depend on the loan program you choose, the area you want to purchase in, your credit score, and your income.
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How To Qualify For A Usda Loan
If youve established that youre eligible for a USDA loan, heres how to qualify:
- Minimum 640 credit score
- Maximum 43% total debt ratio
- No down payment is necessary
- Stable income and employment for the last 2 years
- Proof that youll occupy the home as your primary residence
- Proof that you dont qualify for any other financing
- 3 years since a Chapter 7 bankruptcy discharge
- 1 year since a Chapter 13 bankruptcy with trustee approval
- 3 years since a foreclosure
Find A Mortgage Company To Pre
Mortgage pre-approvals are available for free through most mortgage websites with no obligation to proceed. Many home buyers get their mortgage from a different mortgage company that pre-approved them. So, dont overthink this step.
The critical part of getting your pre-approval is that you get it. Without a pre-approval, you cannot buy a home.
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Hows Your Financial Health
Before clicking through pages of online listings or falling in love with your dream home, do a serious audit of your finances. You need to be prepared for both the purchase and the ongoing expenses of a home. The outcome of this audit will tell you whether youre ready to take this big step, or if you need to do more to prepare. Follow these steps:
Look at your savings. Dont even consider buying a home before you have an emergency savings account with three to six months of living expenses. When you buy a home, there will be considerable upfront costs, including the down payment and closing costs. You need money put away not only for those costs but also for your emergency fund. Lenders will require it.
One of the biggest challenges is keeping your savings in an accessible, relatively safe vehicle that still provides a return so that youre keeping up with inflation.
Review your spending.You need to know exactly how much youre spending every monthand where its going. This calculation will tell you how much you can allocate to a mortgage payment. Make sure you account for everythingutilities, food, car maintenance and payments, student debt, clothing, kids activities, entertainment, retirement savings, regular savings, and any miscellaneous items.
Start Your Home Search And Make An Offer
Your real estate agent will line up showings for you. But you should have an idea of what you want beforehand. Make a wish list and focus on it. Then, prepare a list of things you cant live without. Going over the list with your agent will help you assess different properties. Once youve narrowed down your choices to one, its time to make an offer.
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Texas Down Payment Assistance
While TDHCAs and TSAHCs programs can be paired with down payment assistance, certain cities in Texas might also have their own assistance programs, which are worth checking out if youre buying a home in the area.
For instance, the city of Dallas offers the Dallas Homebuyer Assistance Program, which is a zero-percent deferred loan that can help with your down payment and closing costs.
The Buyers Credit Score Dropped Below The Minimum
Mortgage pre-approvals are test runs for a buyers actual mortgage approval. So, if the buyers credit score drops before finding a home, the buyers pre-approval may be invalidated.
In general, the minimum credit score requirements are:
- FHA: 500 credit score
Learn more about how to fix your credit score to buy a home.
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What Is Financial Health
Financial health is another way of stating what one’s financial condition is and involves savings, expenses, and ongoing income through employment. It also involves a person’s credit score, which determines the ability to qualify for loans such as those for homes or new vehicles and the terms of the loans. Financial health reflects the ability to live within one’s means, save money and be able to afford all monthly obligations like loan payments and everyday expenses.
Do I Qualify As A First
You are typically considered eligible to apply for first-time home buyer loans and benefits if you haven’t owned your principal residence within the past three years.
Some first-time home buyer assistance programs are even more lenient, offering financial aid in specific areas targeted for redevelopment, even to repeat buyers.
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Check With Experienced Lenders
Most people only get a mortgage quote from a single source. But you would be wise to get a quote from a mortgage broker, a bank and a credit union. If you have several possible ways to get approved for a loan, you are more likely to get approved. You also can compare the offers you get and possibly ask the lender to match the rate with another program.
What Happens After Im Pre
The next steps after pre-approval are locking in your rate and closing on your loan. Locking means that you have selected a property, made an offer, and the offer has been accepted.
Rate locks are good for a limited amount of time, but you should always lock your rate early. Rates cant drop below 0%, but they can sky-rocket higher without notice.
Closing means that you will sign the contractual documents to make your mortgage loan official and binding.After closing, you will own your first home!
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What First Time Home Buyer Programs Are Available
There are a variety of mortgage loan programs available for first time home buyers. First time home buyer programs from the FHA, VA, various renovation loans such as the FHA 203K and Homestyle, and even certain conventional loan programs like HomeReady and HomePossible can help first time home buyers achieve their financial goals. In addition to the government and conforming conventional loan options below, additional first time home buyer programs vary from state to state based on local incentives and offers.
