First-time homebuyers FAQs

Preparing for your first mortgage and home is a significant undertaking, but it’s manageable if you plan in advance. First, you should check your credit scores to see where you stand. You may be able to get a mortgage with a credit score of around 580 to 620, but you won’t get the best interest rates.  If you have time before buying, do your best to get your credit score to 740 or higher. Most mortgage lenders offer the best rates for people with excellent credit scores. Next, you should be saving for a down payment and closing costs. Certain loan programs don’t require a down payment and others only need a small down payment.  VA and USDA loans could require no down payment. FHA loans may allow down payments of as little as 3.5%. Be careful with these loan types, though. They may carry other costs that make your mortgage more expensive, such as private mortgage insurance (PMI). In some cases, you may not be able to remove PMI without refinancing your loan, which can be costly. Conventional mortgages with a 20% or higher down payment tend to offer better rates and fees. You generally won’t have to pay PMI with a larger down payment, either. This could save you a significant amount on your monthly mortgage payment.
There is no one type of mortgage that is better than another. Each type of mortgage has its benefits and drawbacks. When looking at mortgages, you want to select the program that is most financially advantageous for you based on your circumstances. If you have a sizeable down payment and a conventional loan offers you the best deal, that may be your best mortgage. If you only have a small down payment, using an FHA loan may work better for you. Just because you qualify for a particular mortgage program doesn’t mean it is a good idea, though. Sometimes you’re better off saving up for a bigger down payment to qualify for a better mortgage program. Only you can decide what the best type of mortgage for your situation is.
As a first-time homebuyer, you may have access to special grants, credits or other benefits. Unfortunately, most of the first-time homebuyer benefits are local or state level benefits which means you’ll have to look for these programs. Your real estate agent or a local mortgage lender may have more information. Mortgage lenders may also offer their own first-time homebuyer programs. In order to use a first-time homebuyer benefit, you may have to have an income below a specific limit or meet other requirements. You could be required to use certain lenders that offer the programs, as well. Carefully read the program’s rules before you start the mortgage application process to make sure you qualify.