Criteria for First-Time Home Buyers for Home Loans
How to Qualify as a First Time Home Buyer
For some, buying a house is the true marker of adulthood and it means you’ve managed your money well. Your lender will respond to this. A good financial history can give a first-time home buyer many advantages. As exciting as buying a house can be, qualifying as a first-time home buyer can sometimes be challenging.
A first-time home buyer is typically one of the following:
- An individual who has never owned a residence.
A single parent who has only co-owned a home with a former spouse.
A person who had previously owned a home that was not in compliance with building codes or other housing regulations.
Today, Federal, state, and local programs are designed to give advantages to first-time home buyers just like you! Agencies and lenders may provide down payment grants, incentives, or favorable terms to get approved.
The FHA Loan for First-Time Home Buyers
The Federal Housing Administration (FHA) has a loan that gives incentives to first time home buyers. It’s flexible if your income is lower than average, does not require a 20% down payment, and can help if your credit score isn’t up to speed. Ultimately, it encourages you to further develop responsible habits as a homebuyer. It makes home ownership a reality by working around traditional criteria and requiring you to pay mortgage insurance (PMI) yearly instead.
The VA Loan for First-Time Home Buyers and Veterans
Another loan program for a first-time home buyer is the VA home loan. Guaranteed by the U.S. Department of Veterans Affairs, it’s offered to military service veterans or active members. If you’re a first-time home buyer and a current or former military member, the VA loan was designed to help you become an owner.
Other Loan Programs for First-Timers
First time home buyers may also be qualified for state and local programs. These incentive programs may offer competitive fixed interest rates or assistance with closing costs. It will vary, so check with your state resources and real estate agent. You don’t want to miss out.
As a home buyer, it’s always a good idea to get pre-qualified first so you know how much you can spend on your home.
The first step is determining your credit score. Getting your credit report and score can be done for free by getting in touch with one of the three credit bureaus: Equifax, Experian, or Transunion (access all three from annualcreditreport.com). The higher your credit score, the closer you are to getting approved.
A higher down payment (a standard practice is 20%) may make you more likely to get pre-qualified. It signifies that you have saved and are willing to commit to the property you want to buy. It may also result in more favorable interest rates, which can save you plenty of money over time.
As a first-time home buyer you should also make sure that you have proof of income. W2’s, paycheck stubs, tax returns, and a verification letter from your employer may increase your chances for approval.
You should also be aware that there will be other out of pocket costs that will rest on your shoulders alone. Maintenance and taxes are part of the homeowner experience! If your water heater suddenly breaks or your plumbing acts up, you can no longer call your landlord. You are the landlord. While it may seem intimidating, it’s a small price to pay to become a full-fledged homeowner.