Buying your first home is one of the most exciting steps you’ll ever take. However, it’s also an overwhelming process, especially to get started. Know that in your fears, your excitement, your concerns, you’re not alone.
Many first-time homebuyers come into our office nervous to start their homebuying journeys.
“Am I making the right decision?”
“Can I really afford it, or will we end up house poor?”
“Is it even worth a discussion? I might not qualify.”
“Even if I do qualify, I know nothing about mortgages or buying a home.”
All these questions and concerns are normal. We understand that this is a big, scary step. The good news is that we have you covered. We’re here to answer some of your most important questions. Beyond that, our mortgage partners walk you through every step of the process, from first question to that final keys-in-your-hands moment.
What if I don’t have a lot of credit?
A common misconception is that you need an abundance of credit to finance a home. However, there is such a wide variety of options that most people do qualify for a loan, even on minimal credit. Do you have a credit score? Is it low or high? Don’t know? Still talk to us. We will work to find the right option for you. We believe that if it’s possible, we will make it happen.
You just need a lender by your side who will work to find the right option for you.
How do I know if I can afford a first-time homebuyer mortgage? I mean, really afford it.
The term “house poor” floats around scaring many first-time homebuyers. At its core, this term means spending a large portion of income on your home, leaving little to no money left for other expenses.
We never want you to spend beyond your means. We do want you to have all the facts and figures so you can make an informed decision. The best way to do this is with a detailed budget.
Start by writing everything down and categorize items by “essential” and “non-essential.” Once you see exactly where your money is going, you can see how much you can spend on a down payment and how much you can afford each month.
Example of Healthy Debt-to-Income Ratio
First, a good rule is to keep your housing payment at less than 28% of your gross income.
Meaning if you make $60,000 per year (gross income) but bring home $48,000 per year (net income), your housing payment should be less than 28% of $60,000.
Second, calculate the total of your car loan payments, credit card payments, and other types of loan payments and add this to your potential mortgage payment.
This is your total debt-to-income ratio. Ideally, it should not be more than 36-38% of your gross income.
If I want a quick and easy loan approval process, should I use an online lender?
Online doesn’t always mean faster and easier. It’s challenging for online lenders to gather all the necessary information before starting the pre-approval process. In the long run, a lack of proper information can make your homebuying journey longer and more stressful.
Find a local lender you trust. Someone you can call or meet for advice. And someone who will sit with the underwriters, the processors, the closers, and your realtor until that house is officially your home.
What is the best tip for first-time homebuyers?
The No. 1 thing you can do is go to a first-time homebuyer class. You can take a FREE course, in-person or online, before even chatting with a lender. These courses help you learn how to budget, perform maintenance on your home, keep your home value high with quality upkeep, and more.
Here are the two programs we recommend to all of our new homebuyers:
Pennsylvania Housing Finance Agency
Community Progress Council
Conclusion
Buying a home and finding the right first-time homebuyer loan doesn’t have to be overwhelming. With the right lender and realtor by your side, you can have a positive, empowering experience. Our Traditions Bank lenders are here to guide you, answer all of your questions, and help you take the next step in homeownership.