First Time Home Buyer

Looking to purchase your first home? Here are some tips for making the best investment.

Welcome to your first home buying experience. Buying a home is a multistep process and can be intimidating for first-time home buyers. Despite popular opinion, buying your first home does not have to be stressful. The more knowledge you have about the process of purchasing your first home, the more equipped you will be throughout the process. Having the right knowledge when purchasing your first home can save you time, money, and boost your enjoyment of the overall experience. These tips will help you finance your first home.


Financial Assessment 

Before you begin the process of buying your first home, you should assess your financial situation. Can you purchase a home with or without a mortgage loan? Other actions you should take to understand your financial health include checking your credit score, reviewing your budget, and monitoring your savings.  

  • Credit Score

Your credit score provides lenders a snapshot of your financial aptitude. Lenders will require a minimum credit score to accept your mortgage loan application.  

  • Budget

Understanding your budget will help you know what kind of house you can afford, and the amount of lending required to finance your home.  

  • Savings 

Lenders will want to know if you have an emergency fund capable of paying for 3-6 months of living expenses. The higher your savings, the more lenders will trust you. 

You will need to understand this information if you choose to purchase or finance a home. Furthermore, if you apply for a mortgage loan, you will be required to present your financial information.

Assess Your Housing Requirements 

Understanding your housing requirements will provide you helpful information to continuing your homebuying experience. Your housing requirements narrow down the estimated cost of your future home.  

Financing a Home 

If you choose to finance the purchase of your home, you will need to verify with your bank if you are eligible to get a mortgage for the purchase. Keep in mind that certain financial institutions could offer you better mortgage rates. Consider browsing the mortgage rates from various lenders in your area. Applying for a mortgage will require you to share your financial history and information such as your credit score, debt-to-income ratio, savings, employment history, and amount for the initial down payment. If a lender pre-approves you to receive a mortgage, they can revoke the offer if you have sudden changes to your financial information. 

For instance, if you finance a vehicle and it changes your credit score, expect your mortgage lending options to change. If the purchase of your new home is under a tight schedule, you will want to consider having a backup lender. Since a pre-approval does not guarantee that you will receive a mortgage at the time of closing on your future home, having a second option does help you stay on schedule for purchasing the home you want.  

Consider First-Time Homebuyer Incentives 

Government-sponsored financial incentives are available for first-time homebuyers made possible by the Department of Housing and Urban Development (HUD) and associated lenders.  

Grants & State Programs 

State-level grants and programs are available for first-time homebuyers. You can apply for these opportunities to receive assistance paying for a down payment or mortgage loan forgiveness. You can find these grants and programs on the HUD website. Most opportunities require you to meet certain financial criteria.  

HomeReady Loans 

These mortgage loans are available for first-time homebuyers whose income does not exceed 100% of the area median income. Buyers must use this house as their primary residence, have a minimum credit score of 620 and pay 3% of the cost of the house for a down payment.  

HomePossible Loans

These mortgage loans are lent through Freddie Mac. They are primarily for first-time homebuyers with an income at or below the median income. It is also a low-income housing assistance program.  Buyers must use this house as their primary residence. Other criteria for this lending opportunity include maintaining a minimum credit score of 620, having a down payment equal to 3% of the cost of the house while maintaining a debt-to-income ratio of 50%.

HomePath ReadyBuyer Loans 

This opportunity is specifically for purchasing homes on the HUD home store website. First-time buyers can receive 3% credit for covering closing cost expenses. Buyers must have a minimum credit score of 620, have a down payment equal to 3% of the cost of the home. Additionally, buyers must have an income below 80% of the area's median income. 

Franny Mae ReadyBuyer Loans 

This opportunity includes a grant that covers all closing cost expenses. Buyers have to purchase homes from Homepath, maintain a credit score of 620, have a down payment equal to 3% of the cost of the home, and have an income below 80% of the area's median income. 

Freddy Mac HomeOne Loans 

This opportunity provides a mortgage to first-time homebuyers who maintain a minimum credit score of 620 and have a down-payment equal to 3% of the total cost of the home.  

Other Considerations 

If you meet certain financial or demographic criteria, you might be able to consider additional benefits. There are many grants or loaning opportunities for eligible Native Americans, Veterans, and Service Members. Further housing incentives are available for those seeking to buy homes in rural or blighted neighborhoods.