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First-time home buyer FAQ

First-time home buyer FAQ

What programs are available for first-time home buyers?

First-time home buyers can use any of the mortgage programs available, provided they’re financially eligible. First-time buyers might also have access to special loans, grants, and home buyer courses that offer savings on down payments and closing costs. Whether you can access these programs depends on where you live. And there may be special requirements to qualify. 

What credit score do you need to buy a house for the first-time?

Most loan programs require a credit score of 620 or higher to buy a house for the first-time. That includes conventional loans, most VA loans, and USDA loans (which require 640+). Home buyers with lower credit may be able to get an FHA loan with a score as low as 580 and a 3.5% down payment. As a general piece of advice, a higher credit score gets you a lower mortgage rate and bigger home buying budget. 

Who qualifies as a first-time buyer?

If you’re buying your first-ever home, you’re a “first-time home buyer” by default. A repeat buyer can also qualify as a first-time home buyer, as long as they have not owned a home in the past three years. The three-year mark can help previous home buyers who have come on hard times get back into a home. Qualifying as a first-time home buyer gets you access to special, low-down-payment home loans as well as assistance to help with the down payment and closing costs. 

What is the maximum income to qualify for first-time home buyers?

Many popular first-time home buyer programs have no income limit. For example, buyers can qualify for an FHA loan with 3.5% down, or a VA loan with zero down, at any income level. But some first-time home buyer programs do impose maximum income caps. To qualify for a zero-down USDA loan, for example, your income can’t exceed 15% above the local median. Similarly, many down payment assistance grants set caps based on the local median income. 

How do I get a first-time home buyer grant?

To get a first-time home buyer grant, you’ll have to look for programs where you live. These grants are typically offered by state and local governments and nonprofits, so they vary by area. To qualify, you generally need to be a first-time home buyer with low-to-moderate income. And you need to make sure the mortgage program you’re applying for allows you to use the funds toward your down payment and/or closing costs. 

How do I know if I’m ready to buy a house?

If you want to know whether you’re ready to buy a house, ask yourself four questions: 1) Do I have a steady job and reliable income? 2) Do I have enough money saved for the down payment AND closing costs? 3) Is my credit history reasonably strong? 4) Do I plan to stay in the home for at least five years? If you answered yes to these questions, you’re probably ready to get pre-approved for a loan and start searching for your dream home. 

What are the benefits of being a first-time home buyer?

First-time home buyers sometimes have access to special loan programs and home buying grants that other buyers don’t. However, these types of programs are often geared toward first-time home buyers who need a little extra help; for instance, lower-income home buyers or those with poor credit. If you have great credit and make a lot of money, the benefits of being a first-time home buyer might not apply to you — but then again, you might not need them. 

How can I buy a house with no money down?  

There are two big loan programs that let you buy a house with no money down: the VA loan and the USDA loan. To qualify for a zero-down VA mortgage, you need to be a veteran or service member. For a USDA loan, you need to buy a house in a qualified “rural” area, and meet local income caps. For people who don’t qualify for these programs, it’s possible to buy a house with no money down by using gift funds or applying for down payment assistance. 

Are there any fees when a home buyer works with a real estate agent?

No, real estate agents are “free” for home buyers; the seller typically pays their commission. Furthermore, because of conflicts of interest, there are almost no situations in which it makes sense for a home buyer to employ the same real estate agent as the home seller.

What is Private Mortgage Insurance (PMI)?

Private Mortgage Insurance (PMI) is an insurance policy which makes homeownership possible for home buyers who don’t want to make a 20 percent down payment. You, the borrower, pay PMI premiums to protect your mortgage lender from default and foreclosure. Should you fail to repay your mortgage, the lender can “cash in” the homeowner’s PMI policy to recover its lost money. Conforming mortgage lenders require PMI when the home buyer makes a down payment of less than 20 percent.

What are points? How do I know if I should buy them or not?

A ‘point’ or ‘discount point’ is an extra fee you pay upfront to lower your mortgage interest rate. One point typically costs 1% of the loan amount, which is equal to $1,000 for every $100,000 borrowed. Buying one point should lower your interest rate by about 0.25%.

Do I need a home inspection?

If you use a conventional loan backed by Fannie Mae or Freddie Mac, a home inspection may be optional. Home inspections arerequired on government-backed loans like FHA and VA. Whether or not it’s required, though, a home inspection is highly recommended by experts. The inspector could find structural or systemic problems you’d want to know about before buying the home. And even if everything checks out, the inspector’s report would let you know how many repairs to expect in the first few years of homeownership.

Check your home buying eligibility today

The easiest way to find out whether you can buy a home right now is to check if you’re eligible for financing. Getting verified by a lender is free, and it only takes a few minutes to begin.

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