Getting your first home is an exciting time, but it can be stressful too. You’ll want to do everything you can to make sure you get a good deal on a home loan and that you don’t end up in over your head financially. This article will take you through the 6 steps to getting a first-time home buyer loan.
The followings are the 6 steps for you:
1. Make sure you have enough for a down payment:
The first thing you need to do is make sure that you have enough money for a down payment. It is usually around 3-5% of the total cost of your home, although it can vary depending on where you live. It’s a good idea to get pre-approved for a loan before starting house hunting so that you know how much money you’ll need to buy a home.
2. Shop around for a mortgage lender:
The second step in the home-buying process is to shop around for a mortgage lender. It can be done by contacting several lenders or visiting their websites to request information about their services. When evaluating a potential mortgage lender, it’s important to consider:
- Reputation – Whether it’s through word-of-mouth or reviews on sites like Yelp and Google+, you’ll want to know what other people think about this company before deciding whether or not they’re right for you.
- Rates and fees – Don’t just focus on rates alone–you should also look into any additional fees associated with getting your loan approved through that particular lender (e.g., application fee).
- Loan program options – Does this company offer any special programs for first-time homebuyers? If so, what are those programs? Are there restrictions as far as income goes? What type of down payment does each program require? These questions should help guide your decision-making process when considering which lender offers the most attractive terms and conditions based on your individual needs and preferences.
3. Apply for a mortgage loan:
Once you’ve made a decision, it’s time to apply for a mortgage loan. This process includes submitting an application and providing the lender with all of the required documentation. For example, you may need to provide proof of income (e.g., paycheck stubs), the credit history (e.g., copies of your credit reports from each agency) and employment status (e.g., W-2 forms).
4. Get pre-approved for a loan:
Pre-approval is a good thing. It shows that you are serious about buying a home and have done the necessary research to know what kind of loan you want and how much it will cost.
Pre-approval can also help you find the right property because when it comes time to negotiate on price, having pre-approval gives sellers confidence in knowing that there aren’t other offers on the table–which will help them set their asking price higher than they would otherwise consider reasonable.
A lender will verify your income and credit history (it’s always better if these numbers are as accurate as possible) before approving, but the process can take one or two days, so it’s always a good idea to start this process early.
5. Find out how much you can afford to borrow:
The next step of a first-time home buyer loan is to find out how much money you can borrow. To do this, you’ll need to run a loan application and see what amount of money the bank says that they’re willing to lend you based on your income, credit history and other financial factors.
You can use a mortgage calculator like this one from Bankrate that will help determine just how much home buying power (or HBP) exists in your market area based on various factors such as down payment amount, interest rate and annual percentage rate (APR).
6. Learn about FHA loans and USDA loans:
FHA loans are a good option for first-time home buyers. They’re government-backed and have lower interest rates, so you can get into your dream home with less money upfront. FHA loans also require less of a down payment than other types of loans: as little as 3.5% for those who qualify based on their income and credit score, versus the usual 20%+ required by conventional lenders.
If you have excellent credit scores (740 or higher), then it’s worth looking into USDA loans as well–these offer even lower rates than FHA mortgages do!
Hence, first-time home buyer loans are a great way to help you secure your first home. Make sure you have enough for a down payment and then you can apply for a first-time home buyer loan. You won’t have to worry about getting approved because once your application is accepted by the lender, they’ll send you an offer letter with all the details.