First Time Home Buyer

What credit score do I need to buy my first home?

One of the biggest concerns people have when buying their first home is knowing if their credit score is high enough to get approved for the home they want to buy. The answer to this question depends on your lender, your credit profile, and whether you are seeking conventional financing or will be participating in a government loan program like FHA or VA financing. For instance, conventional financing can typically require a credit score of at least 720 for the most favorable rates, while FHA loan programs are sometimes available to borrowers with scores as low as 580. (Generally speaking, the higher your credit score, the lower your interest rate.)

Is it true that I should review my credit report?

It is vital you review your credit reports from each of the “big three” credit bureaus before applying for mortgage financing. Annualcreditreport.com should be your first stop. You can get a free copy of your TransUnion, Equifax, and Experian credit reports. Get all 3 and review them to make sure there aren’t inaccuracies like late payments, unpaid collection items, or accounts you don’t know about. If you find inaccuracies, you can file a dispute; unpaid collections must be paid before mortgage approval is possible.

What kind of mortgage should I get?

The kind of mortgage you should get depends on you and your situation. If you have a 20% down payment and a good credit profile, conventional financing is probably your best bet. However, if you have a smaller down payment and meet income and maximum loan requirements, you might find that FHA or VA loan programs might be a better fit for you. (Important caveat: If you get FHA-backed mortgage financing, you might pay for more generous down payment requirements with higher than expected mortgage insurance premiums—these can sometimes add a couple hundred dollars to your monthly mortgage payment. If you’re considering an FHA loan, talk with your Happy Homes real estate agent. We’ll be glad to help you determine the amount of your mortgage insurance premiums.)

Is it possible to buy my first home if I don’t have any money for a down payment?

Yes! The Cullman area is considered “rural” for financing and may qualify you for a 100% loan called a Rural Home Loan or USDA loan. There are certain criteria that must be met, but most first time home buyers do qualify. This is usually the most popular first time home buyer loan option. Ask your Happy Homes Real Estate agent for more information on how to get a 100% loan for your first home!

What is preapproval and how important is it to the buying process

Pre-approval is the process where your lender takes a hard look at your entire financial situation—credit, income, other financial obligations, etc.—and determines exactly how much home you can afford, and more importantly, the maximum amount they will loan to you. Once you’re preapproved, you should receive a preapproval letter, which can help your offer be taken more seriously by sellers when you find the home of your dreams.

How much home can I afford?

The answer to this question depends on your income, other credit obligations, and the type of mortgage program through which you will receive mortgage funding. Talk with your Happy Homes real estate agent. They’ll be glad to help you determine a rough ballpark figure if you aren’t preapproved for a mortgage.

Which lender should I use to finance my home purchase?

You have a lot of options when it comes to obtaining mortgage financing on your first home. We work with a number of excellent local lenders. If you like, we’ll even go with you to meet one of them to get the mortgage application process started. If you don’t want to use a local lender, there are also a number of reputable national lenders you might choose to work with in financing your first time home purchase.

How big should my down payment be?

The amount of your down payment will depend on your income, your credit score, lender requirements, and the kind of mortgage loan you are seeking. Conventional mortgages typically require 20% down payments, while government-backed programs like FHA have more lenient requirements (as little as 2%-3%).

Does it matter if I carry credit card balances?

A general rule of thumb when seeking mortgage approval is to pay off your credit cards and not use them for a few months before applying for a mortgage. This is good advice because credit card balances will reduce the amount of home you can afford. (For future reference, you should never, ever let your credit card usage in a given month rise above 20% of your credit limit because it can have a negative impact on your credit score.)

What do I do if I have questions along the way?

As a first time home buyer, you will probably have questions as you go through the home buying process. Lean on your Happy Homes real estate agent for help! They’re here to make the process of finding, negotiating, and financing the home of your dreams as simple as humanly possible!