First Time Home Buyer Loans
Welcome! I'm Larry Penilla. Thanks for considering A&M Mortgage Group in Merrillville, IN for your first home loan.
The day you realize you're finally able to buy your first home is an exhilarating one. And the process of applying for your first mortgage can be a daunting one. I'm here to help make that process as smooth and as easy as possible.
Why You Should Get Pre-Approved First
Many first time home buyers start the process of buying a home by racing to find a realtor, looking at listings, or by viewing models in builder neighborhoods.
The problem with this approach is you may get your heart set on a home only to learn you can't get approved for a mortgage large enough to buy it. Or, just as bad, that you can afford the home, but the mortgage process will take a little too long. Before you know it, someone else has snapped the house up.
So the best piece of advice I can give any home buyer is to take a deep breath and secure the mortgage first.
Pre-approved or Pre-qualified?
Being pre-qualified is not enough. A pre-qualified mortgage is based on a cursory review of your reported income and your credit score.
Pre-qualifying for a mortgage doesn't do much more than give you a ballpark figure on what kind of loan you might qualify for.
By contrast, you get pre-approved for a mortgage by submitting documentation to the lender. You'll receive a letter granting conditional mortgage approval. It will name an amount, the terms, and the interest rate. This allows you to go home shopping.
You'll receive final approval after the lender approves the house you want to buy, and then you close on the purchase of your new home.
What types of loans are available to first time home buyers?
Good news: there are lots of programs for first time home buyers.
FHA Home Loans
FHA Home Loans are often the most accessible loan for first time home buyers. They're available even to borrowers who have a lower income, and they're more forgiving of low credit scores.
You will need a down payment to take advantage of these loans. If your credit score is 580 or above, you'll only need a 3.5% down payment. If your score is between 500 and 579 you will need a 10% down payment.
Did you know many conventional mortgages place restrictions on where your down payment comes from? FHA is more forgiving here, too, allowing you to use gifts from family members or friends to make your down payment. You can also use grants, like a HUD grant. And, of course, traditional savings are always a good thing.
You won't necessarily have to worry about closing costs (third party expenses such as the appraisal, lender fees, title insurance…) either -- because you can help negotiate with the seller and or lender to pay your closing costs.
First time home buyers may also be eligible for a U.S. Department of Agriculture (USDA) loan. These loans ask you to purchase a home in a USDA eligible location.
On paper, this means a home in a "rural area." In reality, many addresses you would not expect to qualify, do.
The USDA home loan program is one of the few reputable 0% down programs left. It requires you to have two consecutive years of dependable income, no late payments or collections for one year prior to the application, and a lender-approved debt-to-income ratio. There's also a limit to how much money you can make: your annual income can't exceed 115% of the area's median, with adjustments for family size.
Individual lenders have the power to make their own determinations about credit scores they will accept before issuing a USDA loan. 640 is the cut-off for conventional lenders, but there are lenders who work with people who have lower scores.
One of the other reputable 0% down programs. This loan is only available to active and retired vets.
Most lenders want to see a credit score of 620 before issuing this loan. There are lenders who will work with a lower score, but they can be hard to find without help.
Ready to get started?
I strive to make the mortgage process as easy and as smooth as possible. It all starts with choosing the right mortgage.
Contact A&M Mortgage Group today so we can go over your unique situation. We'll find the right loan for your first house!