For most Americans, buying a first home is a huge decision.  It is a lifelong dream and the biggest expense they will ever make. Most people will require some form of financing when buying their first home. In addition to looking for the right home, first-time homebuyers will also be dealing with a mortgage application.

This means there will be plenty of opportunities to make mistakes during the process, warns Paramount Management, a property management company in Phoenix. This is why first-time homebuyers need as much info as possible on how to buy a first home. This post is a guide on how to get a home loan for the first time.


Before you apply for a loan

Lenders check a few things to determine if an individual qualifies for a mortgage and how much they qualify for. Knowing these things beforehand will make the application process easier.

How much do you have saved?

Most lenders will not provide 100% of the money needed to buy a home; borrowers will need to contribute part of the money. Before applying for a loan, you should have enough money saved up for this.

Your credit history

Your credit score is how lenders determine if you are likely to pay back or default on a loan. A high credit score means lower interest rates and more favorable lending terms. Getting your credit into shape will help you get a less expensive loan.

Your income, assets, and liabilities

How much money do you earn? Do you have major debts you are repaying? How much do you have leftover every month after settling your obligations to your creditors? Will it be enough to cover the monthly loan repayments? What assets do you own?

Down payment

How much of the purchase price of a home should you expect to pay (your down payment)? The higher your down payment, the cheaper the loan will be. The standard amount lenders require is 20%, but it can be as little as 3%.

Prequalifying for mortgage

Mortgage prequalification is the first step in the home-ownership journey. Lenders use it to determine how much you might be able to qualify for, based on the information you provided and your credit score.

It does not mean the lender has approved you for a loan. But it helps you evaluate available mortgage options and choose the best one. The process can take as little as one hour. Do not submit too many prequalification requests; it will hurt your credit score.

The first-time buyer’s advantage

Several programs assist first-time homebuyers by making the home buying process easier for them. These help first-time buyers by offering:

  • Low or no down payment mortgage
  • Assistance with closing costs
  • A chance for people with poor credit to buy their own homes

Most of them are federal, state or local government programs. They are open to all citizens and legal residents of the U.S. Here are some of the programs that assist first-time homebuyers:

Government-Backed Loans

A government-backed loan makes it possible to get your home with a low down payment or even if you have poor credit. The loans are guaranteed by the government and issued by private lenders. The most popular ones are;

Good Neighbor Next Door

This program targets teachers, firefighters, emergency medical technicians, and law enforcement. It is sponsored by the Department of Housing and Urban Development (HUD) and offers 50% off specific HUD properties.

First-time homebuyers can buy Fannie Mae foreclosed properties with as little as 3% down payments. This program offers up to 3% back on closing costs for the mortgage. But homes sold under this arrangement may need some repair.

Home loan options

Homebuyers have two options for how interest rates paid on their loan is structured.

Fixed-Rate Mortgage

These have a fixed rate throughout the loan. The advantage of a fixed-rate mortgage is that if you took the loan when interest rates were low, you keep paying the same rates even when interest rates go up. Additionally, it is easier to plan payments, since you know how much you pay monthly.

Adjustable-Rate Mortgage (ARM)

The interests on these loans vary with prevailing market conditions. The advantage of an ARM is that it allows you to qualify for higher loan amounts and you can lock in a lower rate for the first few years of the mortgage.

Getting preapproved

When you are preapproved for a loan, it means that your creditworthiness has been confirmed and you will get an offer letter from the lender. The approval letter will indicate the maximum amount you can borrow. And you will be able to present this letter when making your offer on any home you want to buy. Being preapproved for a loan gives you an advantage over other buyers who are not.

Let us make sure you have a solid approval in hand, so that when you find your dream home you can secure it!  Get Pre-approved Now. 


The information provided herein has been prepared by a third party company and has been distributed for education purposes only. The positions, strategies or opinions of the author do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.