Ask any first-time home buyer, and they’ll tell you – no one knows when they’re ready to buy their first home. Buying your first home is an emotional and financial experience. It will scare you. You will feel doubt, worry and nervousness.
You will also feel the excitement and allure of new beginnings.
You’re a first-time home buyer, you have tons of first-time homebuying questions, and we’d love to answer your questions for you.
From our website, email newsletter and YouTube channel: Here are the questions our readers most often ask.
How do I know when I am ready to buy my first home?
For many first time home buyers, getting ready to buy a home is an exciting feeling.
In its 2022 Buyers & Sellers Generational Trends report, the National Association of REALTORS® reports that more than half of buyers under the age of 40 said their primary reason for buying a home was “it was the right time.”
Tenants experienced life events such as getting married or starting a family; They wanted more space for their pets or for themselves. They wanted the freedom to paint and decorate their homes.
Finances matter, but less so than one might expect.
Only 1 percent of first-time buyers said they “wish they had waited” to buy, which tells us that renters are OK with reaching their American Dream regardless of financial circumstances.
Click to see today’s mortgage rates.
How much money do I need to buy a house?
First-time home buyers cannot buy a home with any of their own money, including their down payment and closing costs.
Government-backed mortgage loans such as VA and USDA loans offer 100% financing, which covers the price of the home and its closing costs. Buyers can combine an FHA-approved mortgage with a forgivable down payment loan and access 100% financing on the home.
The most common mortgage types also allow buyers to accept cash gifts to help with the down payment and closing costs so that buyers can bring less money to closing.
mortgage
prior approval
in minutes
What are the minimum financial requirements for buying a house?
Cash flow, credit rating and savings are the three financial components of getting ready to buy a home and get a mortgage.
Cash flow is how much money is left after paying your monthly bills, including credit cards, car loans and court-ordered payments. The typical homeowner spends between 25 and 45 percent of their monthly income on bills.
Your credit rating measures how well you manage your credit and pay recurring bills. Credit score ranges up to 850. Buyers with a credit score of 500 or higher can get their mortgage approved, as can buyers with no credit records.
Savings is how much money you have in the bank after you bought your home. Buyers should always keep at least three months’ housing payment in their savings as life is unpredictable. Having a healthy savings account protects against risk.
Who qualifies as a first time home buyer?
A first time home buyer is anyone who has not owned their principal residence during the last 3 years, with the exception of single parents, divorced and displaced housewives, and people living on rent.
First-time home buyers can access mortgage rate discounts and grant programs that are not available to the general population. They also have access to low-down payment loans, including the Traditional 97, which allows as little as a three percent down payment with an average or better credit score.
Can I buy a house with no money?
Yes, first time home buyers can buy a home without spending a dime.
Some government-backed mortgages allow no down payment mortgages, and other mortgage programs combine grants and forgivable loans into 100% mortgages for first-time buyers.
First time home buyers can avail 100% financing through:
- VA mortgage
- usda mortgage
- forgivable loan
- doctor loan
- down payment assistance program
Buyers may also be eligible to use cash gifts for the down payment.
Click to get pre-approved for up to 100% financing.
When is the best time to buy a house?
It is a good time to buy a home when you are emotionally ready to look for homes and are financially able to make the payments and when the housing market conditions are in favor of home buyers.
Emotional signs that you are ready to buy your first home are:
- want more space or freedom to decorate
- preparing for a wedding or a new baby
- Renting is Feeling Tired
Financial preparedness includes having a predictable income from a job or investment, positive monthly cash flow for your home, and an emergency fund in case of illness or job loss.
Favorable market conditions occur any time, except when home prices fall, and mortgage rates rise concurrently. There have been only eight such periods in the last 50 years.
Find out if now is a good time to buy a home.
Is it cheaper to buy a house or build a house?
Whether it is cheap to buy or build a house can be answered only after a decade of living in a property. A new construction home may be more expensive than a comparable existing home. Nevertheless, the cost of its upkeep and maintenance can be reduced over time.
For example, a roof has an expected lifespan of about 20 years, so when you buy a new home, chances are it won’t need a new roof while you live there. However, building materials and location can increase the cost of building a home by up to fifty percent.
First time home buyers can look at new and existing homes in their home search and compare which one better suits their life and needs.
What is the difference between a mortgage broker, lender and bank?
The difference between a mortgage broker, a mortgage lender, and a retail bank is where their money comes from and which government group licenses them to lend. Customer service levels, interest rates and closing costs are mostly similar – although brokers and lenders move more quickly than retail banks.
There are reasons to choose one mortgage company type over another, though:
- Mortgage Brokers: Best for Buyers with Unique Income and Credit Scenarios
- Mortgage Lenders: Best for Typical Home Buyers
- Retail Banks: Best for Buyers Who Prefer the Convenience of a Branch Bank
Click to find out today’s mortgage rates.
What is the best mortgage for a first time home buyer?
There are many mortgages that work very well for first time home buyers.
Some mortgages allow buyers to make a smaller down payment or no down payment on the home. Other mortgages allow buyers with low credit scores to be approved. There are job-specific, military-specific and city-specific mortgages.
Here’s a guide to choosing which mortgage might work best for you as a first-time buyer:
- For buyers in suburban and rural areas: USDA mortgage
- For Buyers With Military Experience: VA Mortgage
- For buyers with excellent credit: Conventional mortgage
- For buyers with average credit: Conventional mortgage
- For buyers with below average credit: FHA mortgage
- For buyers of 2-4 unit homes: FHA mortgages
- For Buyers in Underserved Areas: Conventional Mortgage
- For first responders and emergency technicians: FHA mortgages
- For buyers with more than 4 mortgaged properties: Conventional mortgage
- For Condominium Buyers: Conventional Mortgage
Get pre-approved now to buy a home.
What is the difference between mortgage pre-approval and pre-qualification?
Mortgage pre-approval and mortgage pre-qualifications are different.
Pre-approvals are authorized mortgage decisions that tell a home buyer how much of a home they are allowed to buy and what mortgage rates and programs the buyer is eligible for.
Pre-approvals use verified credit scores, income and asset information, and employment history. They are a reliable, accurate tool to help you buy your home.
In contrast, pre-qualification estimates how much a home you can afford based on self-evaluation and self-reporting. Home sellers will only accept pre-qualification as proof of purchasing ability, and qualifying home offers with pre-qualification letters will be rejected.
Automate mortgage pre-approval here.
What credit score do I need to buy a home?
500 is the minimum FICO credit score required to be approved for a mortgage. However, higher credit scores give buyers access to additional mortgage options.
Here is a list of the minimum credit scores required for seven common mortgage types as published by the relevant government agencies.
- FHA Mortgage: 500 Credit Score
- VA Mortgage: 580 Credit Score
- Conventional Mortgage: 620 Credit Score
- HomeReady Mortgage: 620 Credit Score
- Conventional 97 Mortgage: 620 Credit Score
- USDA Mortgage: 640 Credit Score
- Home Potential Mortgage: 660 Credit Score
Note that the mortgage guidelines make an exception for home buyers with no credit history. Mortgage lenders may require a credit score above the minimum required score.
Do You Qualify for a Mortgage? Get pre-approved today.
Do you have first time home buying questions? Ask us
If you have a first time home buying question that we should have addressed in this article, use the website chat to ask us your question. Plus, we update this post monthly with questions from other first-time buyers.
To get the latest updates and the best information to help you buy your first home, subscribe to Homebuyer.com below.
mortgage
prior approval
in minutes
