Things to Know as A First Time Homebuyer
One of the most significant achievements in adulthood is buying your first home. The journey is long but can be a gratifying moment in your life. Most first-time homebuyers want to purchase the largest house in the neighborhood, but the first step in this first-time homebuyer journey is receiving a pre-approval letter.
Consistently paying your bills on time, avoiding collections, and maintaining a healthy credit score will all be rewarded when it comes down to your pre-approval letter. Having a credit score of 600 and higher qualifies you to be a part of housing programs, receive lower interest rates, participate in different loan programs, and change the length of your loan. Let’s take a closer look at how the preapproval letter process works!
After researching which financial institution can offer the best fit for you, you’ll provide them a wealth of information, including your:
Financial institutions need to know how much money is coming in as well as all of your recurring charges. This knowledge gives that lending company the ability to rightly estimate what they will preapprove you for when searching for a home. You may have an idea of how much house you want or even may need, but financial institutions don’t want to approve you for an amount that would cause you to go into foreclosure.
Types of Mortgage Loans
Now that you have your pre-approval letter, you can choose between a few different mortgage loans as a first-time homebuyer. If you are an active or retired military personal, you qualify for a Veteran loan. Most commonly, you will come across a Federal Housing Administration (FHA) loan or a conventional loan, though.
There are few differences between an FHA loan and a conventional loan. One of the significant differences of an FHA loan is that the government backs individuals with credit scores lower than 620. With this qualification comes the stipulation of making a down payment based on the credit score. The higher the credit score, the lower the down payment. A person receiving a conventional loan has a credit score of at least 620 with a low debt to income ratio. Both loans will be insured if the down payment is not 20% of the selling price.
Buying a home can be stressful, but having the ability to go through the journey and come out on the other side with the keys to your new home is well worth it. Equity Mortgage wants to be a part of that journey and walk with you through it all. For more information, call or visit our website today to learn more about home loans and financial literacy. Follow us on all of our social media platforms.
Visit Baltimore City Department of Housing & Community Development for Homeownership Incentives.