How to Buy a House: Steps to Buying a House for the First Time

Table of Content

• I have a low credit score. What kinds of loan programs are there for me?
• How much down payment do I need for a house?
• Down payment assistance options
• The Bottom Line: Help Is Available For Those Buying A Home For The First Time
• State and Local Government Cash Grants
• Step 9: Head to closing
• First-Time Home Buyer Grants and Programs in 2022

Start checking your credit history well before you plan to buy a house — at least a year in advance if possible. This will give you time to flag errors on your report, solve them, and even work on raising your score if that’s necessary to get a loan. Also try to pay down credit card balances if you’re able, which will help increase your score. But there are benefits to paying mortgage insurance if it puts you in a home sooner. It’s just one more cost versus benefit to consider as you put together your home-buying budget.

Tax deductions and employer-sponsored programs are often more flexible. You can deduct your mortgage insurance on your personal home even if you have other properties – up to the limits mentioned earlier. If you opt for a government-backed loan like a USDA loan, VA loan or an FHA loan, note that your home also has to meet certain higher safety standards before you qualify.

I have a low credit score. What kinds of loan programs are there for me?

Even if you got pre-approved for your home loan, your lender will want to conduct a home appraisal. This is where the lender checks out the house to make sure it’s a good investment. So it’s essential to know your credit score, and take steps with those overextended credit cards and high-interest debts to bring your credit score up to snuff. Here’s more on how to check your credit score and what number is best to buy a first home. In turn, the lender will use this info to decide whether or not to loan you money, as well as how much and at what interest rate. Ideally a down payment on a mortgage should be 20% of the home’s price to avoid added fees, but if you don’t have that much of a down payment, don’t worry.

Automatic assistance includes the proposed $15,000 First-Time Home Buyer Tax Credit, which the IRS credits; and, the LIFT Act which is a joint stimulus between the FHA and the U.S. There are more than 30,000 down payment assistance programs available to first-time buyers. Another government agency, the FHA, makes 3.5 percent down payment loans available to buyers. Many first-time home buyers can buy a home with no money down, 3% down, or any other down payment size. So, before starting your search for a home, decide how important making a down payment is to you because you also have money in savings after your purchase is complete.

How much down payment do I need for a house?

Even if you’re a Homebuyer.com customer, we recommend that you get two or more rate quotes to ensure you’re getting the best mortgage terms. The easiest way to find out whether you can buy a home right now is to check if you’re eligible for financing. Getting verified by a lender is free, and it only takes a few minutes to begin. Get pre-approved to check your eligibility for the Good Neighbor Next Door Program. All HOP applicants must complete an eight-hour first-time homebuyer education seminar and obtain a Certificate of Completion from a HUD-approved facilitator.

You might be wondering about some general first-time home buyer tips, or the best way to get down payment assistance or help with your closing costs. Manual down payment assistance programs are ones that home buyers must research and apply for on their own. These include most state and local programs, which require extra documentation and may introduce delays into your home buying timeline. Local down payment assistance won’t always be compatible with a mortgage approval, either, so investigate programs early.

Down payment assistance options

So, make sure you get estimates from a few different lenders to find the best rate and fees before you commit to a home loan. Alternatively, some home shoppers like to work with a mortgage broker who can offer a variety of loan products at once. For this example, let’s say you’re aiming for a mortgage payment of $1,400 per month. We’ll now work backward to determine your maximum home purchase price. Most mortgage programs require a down payment, however small or large. Theoretically, this is money you put toward the home price out of your own pocket.

Habitat for Humanity is the largest nonprofit builder in the world, with over 800,000 homes built. You might qualify for charitable or nonprofit assistance if you have low to moderate income. Charities and nonprofits are non-government organizations that can offer you educational and financial resources when you buy a home. Nonprofits usually have income qualifications that dictate who can get help.

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The typical Homebuyer.com customer uses about 5 months to find a home. In that time, credit score issues can be corrected and account balances can be reduced strategically. FHA mortgage insurance must be paid for the life of the loan. But borrowers can refinance into a new loan type to cancel those premiums down the road. No one expects you to be an expert on the home-buying process, especially when you’re a first-time buyer. The more you know, the better off and less stressed you’ll be.

Conforming mortgage lenders require PMI when the home buyer makes a down payment of less than 20 percent. Available in rural areas and low-density suburbs, the USDA loan is another no-money-down mortgage you can use to finance a home. It offers lower mortgage rates, zero down payment, and cheaper mortgage insurance to borrowers with low to moderate income.

The homebuyer education counselors will be available to assist program participants throughout the home buying process. Program participants are encouraged to take advantage of this resource. Charities, nonprofits and employer programs are also available. These programs vary by state, but you can easily find programs you qualify for through HUD’s website. As a first-time buyer, you cannot have owned property in the last 3 years.

Over the course of weeks and months, rates can change by 50 basis points (0.50%) or more. Once you’ve decided which mortgage loan type works best for you, you’ll want to begin thinking about your monthly budget and how much home you can afford. Start by determining your budget for a monthly mortgage payment.

Fortunately, many lenders accept down payment assistance, which can help you cover the upfront costs of a down payment. As a buyer, just keep in mind that mortgage pre-approval is different from mortgage pre-qualification. Pre-qualify, and you’re undergoing a much simpler process that can give you a ballpark figure of what you can afford to borrow, but with no promise from the lender. Getting pre-approved is more of a pain since you’ll have to provide tons of paperwork, but it’s worth the trouble since it guarantees you’re creditworthy and can truly buy a home. You might wonder, then, why so many people think 20% down is the minimum.