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First-Time Buyer? What to Look for in a Home Loan

There are many firsts in a person’s life, but few are quite as momentous as buying your first home. It’s a right of passage, the American Dream. Still, if you’re somewhere in the process, all it takes is a quick search online to realize how many steps you’ll move through and just how much you need to know.

The good news is there are resources to help you every step of the way. You might think the best place to start is by finding a house. It’s not. Instead, as a first-time buyer, looking at home loans is where you should begin.

What Is a First-Time Homebuyer?

The answer may seem obvious: a first-time homebuyer is someone who hasn’t owned a home before. That’s true, but there are other aspects. A first-time buyer can also include:

  • An individual who hasn’t owned a home in a three-year period prior to purchase
  • Single parents
  • Displaced homemakers, even if they recently owned a home with a spouse
  • Those who live in non-permanent housing, such as an RV

In short, if you haven’t owned a home in a while or you’re new to the process through individual circumstances, you may benefit from doing your research early.

What Home Loans Appeal to First-Time Buyers?

Interest rates. Down payments. Closing costs. There are many concepts you have to learn as a first-time homebuyer. Seeing the money add up as you understand what each term means is enough to scare you away.

Lenders know that. They understand there isn’t a perfect approach to homeownership. Every individual has their own story. They want and need different things.

Luckily, there are many ways to get a home loan. Working with a lender such as Solarity Credit Union from the start can steer you toward the right first-time-buyer home loan program that suits your needs. Programs like:

No-Down-Payment Programs

Coming up with cash for a down payment can be a huge hurdle for some individuals. It might have pushed your plans back for years as you try and save.

For those who meet eligibility requirements, no-down-payment loans offer a way for those on a tighter budget to secure a loan without waiting years to save up money for a down payment. Benefits include:

  • Up to 100 percent financing
  • Fast pre-qualification process
  • No money is due at closing except for standard closing costs

And that’s just the start. If you’ve been a little nervous about applying for a home loan before, this may be the perfect program to make your dreams of home ownership come true.

Low-Down-Payment Programs

If you don’t qualify for a no-down-payment loan, there are other programs to help you get into a home. Low-down-payment mortgages reduce the amount of money a homebuyer needs to put down, making it more reasonable for a first-time buyer. Many make it possible to buy a home with as little as 3 percent down.

Traditional Home Loans

Conventional home loans are by far the most common type of mortgage available today. Instead of being backed by government programs, conventional home loans originate and are backed by banks, credit unions, and other financial institutions. They bring many advantages to the table, including:

  • Lower costs: With a higher credit score, you can find loans with lower interest rates. If you put at least 20 percent down, you can avoid paying additional insurance premiums for the increased risk.
  • Higher loan limits: Loan amounts are based on your financial backing and needs.
  • Flexibility: Without the need to follow government-backed loan guidelines, private lenders can be more flexible with the way they offer a conventional loan.

What You Should Know About the Approval Process

The approval process begins before you find your dream house. In fact, the approval process should begin the moment you start thinking of buying a home. That’s because you can save a lot of time and heartache if you have pre-approval before you look at homes, to fully understand what you qualify for and ensure you meet the guidelines.

For a first-time buyer, the home loan process starts by connecting with a lender and seeing where you stand.

Pre-Qualification or Pre-Approval – What’s the Difference?

A lender can help you get your paperwork in order, giving you a better idea of what you qualify for. As you do your research, you’ll likely find lenders talk about pre-qualifying and pre-approval. There is a difference.

Pre-qualifying means a lender has reviewed your information and decides you will “likely qualify for a loan” based on your current financial situation. You provide them with basics, such as income, assets, and debt information. They take that unverified data and give you an amount you’ll most likely be approved for. There is no guarantee in this process.

Pre-approval takes it up a level. If you receive pre-approval from a lender, it means you’re “approved for a loan” and will receive a letter that states the approved loan amount. Unlike a pre-qualified loan, getting pre-approved requires verification of your financial situation.

Should You Get Pre-Approved?

In short, the answer is: yes, being pre-approved means you’ve been approved for the loan amount stated within the letter. The benefits include:

  • No fees: Lenders won’t charge you for the pre-approval process.
  • Helps you know precisely what you can afford: You can shop for a new home with confidence.
  • Speeds up the closing process: A lender will only need to verify the original information to ensure you still meet the qualifications.
  • Gives you negotiation power: If you’re competing with another potential homebuyer, a pre-approval letter can sway it in your favor.

How To Get Started

Hopefully, this has increased your confidence as a first-time buyer and assured you that there is a home loan perfectly designed to suit your needs. It doesn’t start with touring open houses but instead begins with the application process.

Get pre-approved for a home loan today with a lender like Solarity today. It’s the fastest way to get into the home of your dreams tomorrow.

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