First-Time Homebuyer Quick-Start Guide
If you're a first time homebuyer, congratulate yourself. Here's a step-by-step task list for getting to the finish line on your first home purchase.
Published:
July 15, 2024
July 15, 2024
Est. Read Time:
Congratulations on your decision to become a homeowner.
It's quite possibly one of the most important decisions of your life. Owning a home leads to stability, the ability to build long-term wealth and a sense of pride.
But you know all that. That's why you're here!
So let's cover some basics for you as a first-time homebuyer (without being overwhelming). We'll link to other resources as we go in case you want to learn more.
Your Finances
- Your future home payment could be more than your current rent. If you haven't already, create a budget where housing costs account for 40% or less of your income.
- Estimate how much you can afford with a home affordability calculator like the one below.
Your Credit
- Imperfect credit? Here's how to improve your credit score.
- Unsure of your credit score? Check your FICO® Score for free here.
Applying for the Mortgage
- Calculators are a great start, but the next step is to get a pre-approval* from a lender. This tells you how much home you can qualify for.
- Real estate agents typically request a pre-approval from a lender so they can help you find a home in your budget.
- It's important to talk to a mortgage loan officer early in the process
- You don't need anything on hand to apply. Most people can apply in 20 to 30 minutes over the phone or online.
A note about speaking to a lender: As a first-time homebuyer, you might be hesitant to speak with a lender. Perhaps you're afraid you'll be talked into getting a loan or buying a house. However, you can often learn more in five minutes with a professional than from months of research on your own. It's illegal for lenders to put you into a loan you don't qualify to repay or discriminate based on certain buyer characteristics. Speak with a lender and get your personalized answers now.
Keep in Mind
- You don't need to have a loan program picked out when you start home shopping.
- Your lender will examine your situation and tell you about the options you qualify for.
Home Loan Types
- Conventional loan: 3%+ down programs available
- FHA loan: 3.5% down payment, especially suited for those with lower income or credit scores
- USDA loan: 0% down payment** geared for single-family homes in rural and suburban areas
- VA loan: 0% down payment*** for those with eligible current and former U.S. military service
Assistance Programs
- Down payment and closing cost assistance is available from nearly every city, county, and state in the U.S. See our 50-state guide.
- Freddie Mac BorrowSmartSM offers down payment assistance.
- Good Neighbor Next Door program offers 50% off the home price and $100 down.
Common First-Time Homebuyer Challenges
- You might be the first in your family to buy a home.
- Little or no down payment? Learn about your low down payment options.
- You might not know where to start your home-buying efforts.
- Credit challenges? You're not alone.
Finding the Home
- Once you're pre-approved, start looking at homes.
- Hire an experienced real estate agent to help you find and view homes in your budget.
- The more homes you tour, the more you'll know what you want.
- Create a list of must-haves and things you can compromise on.
- More on finding the right home
Making an Offer
- It's okay to make many offers on homes before a seller accepts your offer.
- Eventually, your offer will be accepted by a seller.
- Agree to a certain amount of earnest money (up-front funds to show you're serious about buying the home). Your real estate agent can advise you on the appropriate amount.
- Within a few days, pay the earnest money to the escrow company. (This will be applied to your down payment and closing costs.)
Getting an Inspection
- Don't waive the inspection requirement even if the seller requests it.
- There could be tens of thousands of dollars in repairs needed.
- It's better to walk away from a house than to buy one with serious issues.
- That being said, be open to a renovation loan, which helps you buy and repair a home with one loan.
Closing the Home Purchase
- Closing should take around 30 days.
- Work with your lender and agent to supply any needed documentation.
- The lender will order the appraisal, which helps verify the home is worth the price you're paying.
- If doing an eClosing, wire the down payment and closing cost funds a few days before closing. Be careful. Call your escrow company to confirm wiring details. Wire fraud is increasing. If doing a traditional close, you may need to obtain a cashier's check and bring it to your closing appointment.
- You'll sign a large stack of papers a few days before the official close of the transaction. This is normal
- Be available to supply any last-minute items through the closing date
- Your lender will finalize the loan. The county will record the purchase and note you as the new owner
Getting the Keys
- You're a homeowner. Get your keys and move in!
Conclusion
The home-buying process isn't something to be afraid of. It takes some perseverance, sure, but it can be completed by taking it step by step.
Whether you're in the middle of the buying a home or just starting out, we hope we demystified the process for you.
It's all comes down to the day you walk into your own home. It's a major step in life and one you can be proud of. Congratulations on starting this worthwhile effort.
*Fairway Advantage® pre-approval is based on a full review of the borrower’s creditworthiness and is contingent upon there being no material changes in the borrower's financial condition or creditworthiness at the time of final loan approval. Final loan approval is subject to the following conditions: (1) borrower has identified a suitable property, and a valid appraisal supports the proposed loan amount; (2) a valid title insurance binder has been issued; and (3) borrower selects a mortgage program and locks in an interest rate that will support the pre-approved monthly payment amount. Loan must close before the expiration date provided in the pre-approval. Offer not available on bond, brokered or USDA loans. Please note that submitting verifying documentation is not a requirement to receive an estimate of closing costs associated with a mortgage loan. **USDA Guaranteed Rural Housing loans subject to USDA-specific requirements and applicable state income and property limits.***A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits.Copyright©2024Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.