First Time Home Buyers
It can be overwhelming to begin your homebuying process. Start here with our answers to frequently asked questions about buying a home for the first time.
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As a first-time homebuyer, it can be a challenge to make sense of financing options and the alphabet soup of PITI, FHA, VA, escrow and many other terms.
We are here to help you think through the questions and help you with the answers on your way to turning your dream of Home Ownership into reality.
When thinking about buying or building a house, some homework and a little research can help you reach your goal.
FAQs About Finding Your First Home
Add up your monthly consumer debt (credit cards, auto loan, student loans), as well as your monthly costs for living expenses such as groceries, gas, utilities, cable, entertainment and other monthly costs. One guideline to use: no more than 40% of your monthly gross income should go toward monthly costs for a new home (mortgage principal and interest, property taxes and special assessments, home owners insurance) and other consumer debt. And you’ll want enough money left in your monthly budget to pay for living expenses.
If you need financing, the value of the home you buy needs to be greater than the loan amount. There will be the cost of a down payment, pre-paid expenses and closing costs.
The size of the down payment depends on whether you are a first-time or a repeat buyer. In some cases, private mortgage insurance (PMI) can lower the amount needed for a down payment. Gift funds from a parent or grandparent can help increase the amount of the down payment.
Pre-paid expenses include home owners insurance, property taxes and flood insurance. Typically, homeowners set aside funds in an escrow account to pay for these expenses each year.
Additionally, allow a cushion for the incidentals that can come with home ownership, such as home appliances, window treatments, landscaping and yard upkeep equipment.
Closing costs vary based on the loan amount and the costs incurred during the home loan mortgage process. They usually include the costs of an appraisal and title opinion of the property, a credit report and an origination fee. There can be commitment, underwriting, processing, recording and flood zone fees associated with a home loan mortgage.
Absolutely! If you are shopping for a home, you want to be prepared to make an offer. Many sellers will not consider an offer if the buyer does not include a pre-qualification letter from a lender.
You will want to demonstrate your capacity to re-pay a home loan and prove you have sufficient funds to close a loan.
Bring the following documents for yourself and any additional borrower(s):
- two months of complete bank statements (financial institution name, account holder name, account number & transaction history)
- two current paystubs, or electronic payvouchers, dated within the last 30 days
- most current two years of personal tax returns
- most current two years W-2s
For pre-approval for a VA loan, you will need a copy, or the ability to obtain, a Certificate of Eligibility and DD214 from the branch of military service.
If you are self-employed, bring two years of business tax returns, if applicable.