In the market for your first home?
Congratulations! Just committing to purchase a house is already a big deal — owning your own home may go a long way toward improving your family’s future.
But as a first-time home buyer, chances are you’re swimming in questions and considerations about this, one of the biggest financial decisions you’ll ever make. What are the hidden secrets of homeownership you don’t even know you need to know?
How should first-time home buyers prepare for the purchase?
Obviously, you’ll need to shop around for the actual, physical house you want to buy. But as far as getting your financial ducks in a row, what do you need to know ahead of time?
For starters, it’s a good idea to take the purchase price of your new home and add in a healthy buffer: paying for the house is just the beginning, as you’ll also be responsible for the home inspection, closing costs, and any planned renovations or unforeseen repairs afterward. Your prospective monthly mortgage payment may also disinclude other required costs, such as homeowners insurance, PMI (private mortgage insurance) and property taxes.
It may take some time to save up enough money to feel comfortable with such a big purchase — but fortunately, that gives you time to work on other important aspects of your mortgage application. You’ll want to have your finances in good shape before you seek to get prequalified or pre-approved, which is a good first step toward homeownership.
For example, improving your credit score by paying down credit card debt and other loans may help you nab a lower interest rate and better loan terms, and keeping a long, steady employment history can also work as a boon in your favor. Lenders will pull your credit report and require other documentation during the pre-approval process, and being pre-qualified may make house hunting with your REALTOR or real estate agent easier, anyway. That’s why so many home-buying professionals say it should be your first step to get pre-qualified, which also gives you a good chance to learn exactly what home price and eventual loan amount you can afford. Then, you can take your pre-qualified letter and head to the right showings and open houses — ones that are actually in your price range!
How much of a down payment do I need to save?
For many buyers, the down payment is the most intimidating part of the home-buying process. After all, most of us don’t readily have tens of thousands of dollars laying around to put down on a house — or anything else, for that matter.
The good news is, many lenders will actually accept gift funds as part of a down payment on your home loan, which means you may be able to get some extra help from a family member or spouse. There are definitely limitations on gift funds, however; some lenders may only accept up to a certain percentage of the down payment as gift funds, and may have restrictions on who can offer the gift. Additionally, the money may need to be “seasoned” to a certain extent, meaning it needs to have been in your account for a given amount of time before it can be used (generally 60-90 days).
What do mortgage lenders look for in buyers?
Along with your credit score, mortgage lenders assess a buyer’s entire credit history, as well as your income, employment history, debt-to-income ratio (sometimes called DTI), and other factors. Mortgage lenders are required by federal guidelines to assess the repayment ability of their borrowers, and these financial factors help them determine how much of a risk you are as a borrower.
The good news is, there are lenders out there who can work with borrowers who don’t have the most traditional application materials.
Where do I shop for a mortgage?
There are many, many options when it comes to home financing. Shopping for a mortgage can be just as overwhelming as shopping for the house itself! But which mortgage provider — and which type of mortgage — is right for you will depend a lot on your personal circumstances.
Here at Quontic, we offer a wide variety of mortgage products for borrowers from all walks of life, from FHA loans1 and VA loans1 (which are helpful to first-time buyers thanks to their low down payment requirements) and everything in between. We’re also unique in that we offer Community Development Loans (CDLs)1, which are specifically designed for those whose paperwork might make it harder to qualify for conventional loans.
Because CDL borrowers are qualified based on a holistic financial profile, they can be a good fit for non-traditional earners (like self-employed borrowers or small business owners), foreign nationals, and others. It’s all part of Quontic’s mission as a Community Development Financial Institution (CDFI) to focus on helping underserved, underbanked communities. If you have any remaining questions, don’t hesitate to reach out! We can’t wait to help you along every step of your home purchase journey.
1All lending products are subject to approval. Rates, program terms & conditions are subject to change without notice. Quontic Bank is not affiliated with or acting on behalf of or at the direction of FHA, VA or the Federal Government. Not all products are available in all states or for all amounts. This does not represent an offer to enter into a loan agreement. Other requirements, restrictions & limitations apply. Information is accurate as of October 19, 2021 & is subject to change without notice. Ask for details.