First-Time Homebuyers

Individuals who haven't owned a home in the past three years are considered a first-time homebuyer.

Credit history is important because it shows lenders how you make payments, manage credit, and handle debt.

Timely monthly payments, responsible credit management, and a clean history free of missed payments or bankruptcies signal to lenders that you're a trustworthy borrower.

However, if your credit has a few blemishes, there are loan programs available for borrowers with less-than-perfect credit.

Improving your credit score can significantly reduce interest costs on your home loan. Here's how you can improve it:

• Make small purchases with your credit card while keeping usage at 30% or less of the credit limit

• Ask for a higher credit limit to lower overall utilization

• Don't close your old credit cards, just don’t use them anymore

• Pay your bills on time, and let any balance hit the statement first

Be patient; some credit blemishes can only be repaired with time.

To get preapproved for a mortgage, you'll need:

• Last two pay stubs with year-to-date income

• W-2 forms & possibly tax returns from the previous two years

• Two months of bank statements (all pages & assets)

• Other income & loan documentation showing the amount and source

Determining how much you can afford comes down to comparing income to housing costs:

• Lenders consider home expenses like principal, interest, taxes, private mortgage insurance (PMI) + HOA (Homeowners Association) dues, if applicable

• Lenders won't consider personal bills like utilities, phone, etc.

Generally, aim to keep housing costs below 36% of your gross income.

Get a Head Start!

Contact a Mortgage Lender

Private Mortgage Insurance (PMI) is an additional insurance policy included in a monthly mortgage payment if the down payment is less than 20% of the home's purchase price.

It is an added protection for the lender, not for the buyer. This premium is based on the risk of the loan. The riskier the loan, the higher the premium.

Earnest money is a good faith deposit when buying a home. It shows the seller that the buyer is serious about purchasing, and the funds go toward the down payment at closing.

Typically ranging from $500 to $1000, it helps secure the property while inspections and financing are secured. If the deal falls through due to unforeseen issues like unfavorable inspections or loan denial, then the earnest money is returned to the buyer.

However, backing out of the purchase because you’ve changed your mind or find a house you like better means forfeiting the money.

Think of an escrow account as a savings account for the home. Included in your monthly payment each month are 1/12 of your homeowner’s insurance cost and 1/12 of your annual tax premium.

This portion of your payment is held in your escrow account, so when the tax bill and insurance bill come due, they are paid in full from this escrow account.