Have you thought about buying your first home but have reservations? Maybe you’re worried you won’t qualify or that mortgage financing is overwhelming. The good news is that there are loan programs for first-time homebuyers that make owning your first home simple. The Koehn Mortgage Group has listed the five things first-time homebuyers didn’t know.
1. First-Time Homebuyers Don’t Need a 20% Down Payment
It’s a common myth that you must put 20% down on a home. While a large down payment is nice, it’s not required to get approved.
Conventional loans allow first-time buyers to put down as little as 3%, and FHA loans require only 3.5%. With both options, you’ll pay some type of mortgage insurance, but the down payment doesn’t have to be a hurdle to buying your first home.
There are down payment assistance programs as well that we work with. It is possible to get up to 5% of the sales price in the form of down payment assistance.
2. Your Credit Score Determines a Lot
When you apply for a mortgage, the first thing we’ll look at is your credit score. It tells us a lot about you and whether you’re a good financial risk.
The higher your credit score you have, the easier it is to get approved for the most competitive rates and terms.
If there are “challenges” on your credit, we have tools that can help us advise you on how best to improve your credit standing and get “Mortgage Ready”!
3. Getting Pre-Approved gets your Foot in the Door
Getting pre-approved for a mortgage, before looking at homes, will give you a leg up on the competition. Sellers only want to deal with serious buyers, and a pre-approval shows that you qualify for financing based on your credit score and financial factors.
A pre-approval letter tells sellers you can afford the home and may open more doors to view and bid on homes you are considering.
4. You Should Keep your Financial Life Status Quo After Applying for a Mortgage
Getting pre-approved for a mortgage is a great first step to buying a home in Texas. But, if you change your financial life drastically after applying, you could lose your approval.
To avoid the risk of losing their financing, first-time homebuyers should avoid the following:
- Changing jobs
- Making large deposits or withdrawals in your verified bank account
- Racking up credit card debt
- Applying for new loans
5. There are 0% Down Payment Loan Programs
Some borrowers may not need a down payment. However, if you are eligible for a VA or USDA loan, we recommend taking advantage of the benefits. They are true 100% financing options!
VA loans are for veterans and current military members with at least 90 days of consecutive service. USDA loans have certain area and income limits, but both are very reasonable. Both loan programs provide 100% financing and have flexible underwriting requirements, making qualifying for a home loan easy.
Final Thoughts for First-time Homebuyers
It’s easier to buy your first home than you might realize. The key is working with the right mortgage team to have the right products at your fingertips.
At Koehn Mortgage Group, we’re happy to walk first-time homebuyers through the loan options, so you know which mortgage is right for you. Contact us today!