Check out this guide for first time buyers in the US. Discover who qualifies, the ideal credit score, as well as the best state to buy a home for the first time
It’s normal for first time buyers to feel overwhelmed by the process of buying a house. As a mortgage broker, your guidance can make a difference in helping them feel confident and prepared. You need to build trust with them and provide support throughout their journey.
In this article, Mortgage Professional America will highlight valuable insights about first-time buyers. We will discuss its definition and who qualifies as such. We will also talk about the steps to buying a home for the first time.
To our usual pool of readers who are mortgage professionals, this guide is one of our client education pieces. If you have leads and clients who are first-time home buyers, feel free to share this with them!
What is a first-time buyer?
A first-time buyer is an individual buying a home who has not owned a home before and has no property to sell. If you’re a first-time buyer, you’re not a property investor. Also, you’ll identify as one if you’re not currently mortgaging or re-mortgaging a house.
Who qualifies
According to the US Department of Housing and Urban Development (HUD), you are a first-time buyer if:
- you haven’t owned a principal residence for three years. If your spouse has owned a home and you haven’t, you can buy a property together and still be considered first-time buyers
- you’re a single parent who has only owned property with your ex-spouse when you were married
- you’re a displaced homemaker who has only owned property with your spouse
- you’ve only owned a principal residence that’s not permanently attached to a permanent foundation as defined under applicable regulations
- you’ve only owned a home that was not in compliance with local, state, or model building codes, and can’t be brought into compliance for less than the cost of building a permanent structure
Check out this video to know more about first time buyers:
Curious about the average age to buy a first home in the US? Read this guide to find out.
How to buy a house for the first time in the US
Purchasing property takes time and effort. Below are five steps that you might want to follow as a first-time buyer:
- research and set your budget
- get pre-qualified
- shop for homes
- get a home inspection
- close the deal
Let’s take a closer look at these five steps to buy property for the first time:
1. Research and set your budget
Before you start looking at homes, review what you can afford. You can use a home affordability calculator to see how much you should spend based on your income and debt. You can also follow the 28 percent rule. This means that your monthly mortgage payment should not exceed 28 percent of your gross monthly income.
2. Get pre-qualified
Once you have an idea of what you can afford, you need to get pre-qualified for a mortgage. This will allow you to understand the loan amount you’re likely to qualify for.
To get pre-qualified for a mortgage, you must provide your financial details to a bank or mortgage lender. These can include your:
- income
- savings
- investments
The bank or mortgage lender will give you an estimate of how much they’re willing to lend you.
3. Shop for homes
When shopping for properties, you can hire a real estate agent to find homes in your price range. Afterwards, you can start touring properties. When viewing homes, take a checklist with you to help you remember the details.
Check important aspects such as water pressure and electrical systems. Be sure that windows and doors open and close properly. Also, don’t forget to pay attention to the neighborhood as well as access to parking. It’s also beneficial to check the property’s proximity to stores and public transport.
4. Get a home inspection
After choosing a house, make an offer. Once it’s accepted, you should get a home inspection. This is important because it helps identify any potential issues. Inspecting the property will let you know about structural damage or safety concerns that might require repairs.
If serious problems are found, you can renegotiate the offer or back out of the deal without penalty.
5. Close the deal
After the inspection, you can choose to close the deal if you’re satisfied. You’ll also need to select a bank or mortgage lender. To help you with this, you can engage the services of a mortgage broker. If you don’t have one, check out the top mortgage brokers in our Best in Mortgage page.
The bank or mortgage lender will then direct you to complete the paperwork and arrange for a home appraisal. This is to make sure that the property is valued appropriately.
Once everything is approved, you’ll close the deal by signing the final documents. Congratulations, you’ve officially become the owner of your new home!
What is the best option for first time buyers?
The best option for first-time buyers in the US is often an FHA loan. This is backed by the Federal Housing Administration (FHA) and allows for a down payment as low as 3.5 percent.
If you’re a service member or a veteran, you can go for a VA loan to get even better terms. You can enjoy benefits like zero down payment and no private mortgage insurance (PMI). Many states and cities also offer down payment assistance or grants, which can further reduce upfront costs.
Credit score for first-time buyers
When you purchase property, your credit score is of the utmost importance. This is because it reveals your credit history and indicates how you have handled debt. Not only that – if you have a solid credit score, it will be easier for you to buy a home. Simply put, the better your credit score, the lower your mortgage interest rate will be.
Note: If you’re borrowing with another person, the lowest median credit score is usually considered the qualifying score.
What is the best state for first-time home buyers?
According to a report by Realtor, the best state for first-time buyers is Pennsylvania, particularly in the city of Harrisburg. It’s the most ideal market because home prices are low, with a median of around $140,000. This makes monthly mortgage payments cheaper than rent in many cases.
The city also has many entry-level homes, such as townhouses and row houses. This is a great option for home buyers who are just starting out. It will also make it easier for them to move up later.
As for commute times, they average just 22 minutes. This will help residents save time and enjoy a better work-life balance.
Turning uncertainty into confidence as a first-time buyer
Buying your first home is a huge step for anyone. This part of life often comes with a mix of excitement and uncertainty. The mortgage process might seem unfamiliar, but a trusted mortgage broker can help make it clearer by offering steady guidance and honest answers.
As you move forward, share your questions and concerns so your mortgage broker can support you with sound advice and tips that fit your situation. With the right support, you’ll soon be holding the keys to a home you can truly call your own.
Have you been through the first-time buyer process? Feel free to share your thoughts and experience in the comments below.
