If you’d like to own your own place but aren’t sure how to buy a home, we can help.
The mortgage process isn’t exactly known for being user-friendly for those who haven’t gone through it before.
We’ll dig into the things you need to buy a house for the first time, the minimum requirements for buying a house, and everything you need to know.
Let’s get started.
How much money do you need to buy a house for the first time?
Nothing beats mortgage pre approval if you’re worried about how much you need as a first-time home buyer or if you want a more accurate loan estimate of how much you qualify for.
Preapproval is a preliminary application process where the lender assesses the loan amount you qualify for.
A mortgage calculator is also an excellent tool to help you figure out the home price you can afford and what price range you should focus on.
Input your information, like home purchase price, down payment, loan amount, and preferred loan term.
The calculator will let you know your estimated monthly mortgage payment.
Credit score and credit history
Finding your credit score and checking your credit history are crucial to your home buying journey.
You can get a free copy of your history from each of the major credit reporting agencies each year.
Carefully review your report. If you notice any mistakes, contact the agency directly to make updates to your file.
What credit score do I need to buy a house?
Mortgage Lenders review a potential borrower’s credit score as part of the mortgage process. Your credit score impacts mortgage eligibility and the interest rate you could get.
Minimum rates will vary by lender but generally, your score should not be lower than 620.
Different loans—different credit requirements
Borrowers with lower credit scores can still qualify for select government-backed loans such as FHA (Federal Housing Administration) or VA (Department of Veterans Affairs) loans.
For example, FHA loans can be approved with scores as low as 580, and the VA doesn’t have a minimum credit score—however, lenders may set their own minimum credit score requirements.
Talk to a mortgage lender, like Austin Capital Mortgage, to find out what you qualify for with your current credit score.
How can I figure out what my monthly payment will be?
When buying a home, the general financial rule is to limit housing expenses to 30% of your gross monthly income. What goes into your monthly payment generally includes:
- Mortgage principal
- Mortgage interest
- Property taxes
- Homeowners insurance
Some properties also come with homeowner association (HOA) fees. HOA fees are typically found in created communities like townhomes or condos, as well as subdivisions.
What if I don’t have a large down payment?
Some government-backed loans, like FHA loans, offer a minimum down payment of 3.5%. However, the minimum down payment is often 3% if you’re planning to apply for a conventional loan.
How to buy a house with no money down
Several homebuyer programs exist to help borrowers buy their first home.
If you’ve served in the armed forces, you may qualify for the zero-down-payment option with a VA home loan.
Down payment assistance program
Many of the down payment assistance programs out there can be restricting and difficult to qualify for. Austin Capital Mortgage’s Down Payment Assistance Program is unlike the others, with requirements that are built to help and not restrict.
- No income limits
- No need to be a first-time buyer
- Co-signers allowed
- Loan limits that follow the FHA Guidelines
- 660 minimum credit score
Steps to buying a home
Now that you’ve done your research and figured out how much you can afford, you can officially start the process of buying a home.
Get pre-approved for a mortgage if you haven’t already
Mortgage preapproval allows lenders to evaluate your finances and verify your income, credit rating, assets, etc.
This is important because a preapproval is more than an estimate—it’s the lender’s initial agreement to lend you the funds to finance your new home.
Mortgage preapproval also lets sellers know you are financially capable of making the purchase, which makes your house hunt a lot simpler. Many sellers won’t accept an offer to buy without a mortgage preapproval letter.
Find a home and make an offer
Once you’ve done a little house hunting and found the right home, you’re one step closer to homeownership.
Your real estate agent works with you to create and submit an offer that includes your mortgage preapproval. If the seller accepts, you’ll schedule the home inspection and home appraisal.
Home inspection, home appraisal, and homeowners insurance
Lenders typically ask for a home appraisal to ensure the home is valued for at least as much as you want to borrow. A home appraisal estimates your new home’s value based on comparable sales in your area.
With a home inspection, a home inspector looks at the property to see what repairs are required.
Some home loan programs, like VA loans, have minimum property requirements. A home inspection lets buyers know if the property they want to buy meets those requirements.
Another condition of most mortgage loans is homeowners insurance, which helps protect your home against the costs of certain damages.
Final walkthrough and closing
The final walkthrough usually occurs a day or so before you take possession of your new home, although sometimes it can take place on the same day.
This is an opportunity for you to make sure any repairs or updates the seller promised to do have been completed to your satisfaction.
After the final walkthrough, you’ll receive your Closing Disclosure documents outlining mortgage terms, closing costs, and associated fees.
Buyers receive the Closing Disclosure documents three days before closing. This document lists out all the details of your mortgage loan so check it carefully and reach out to your lender with any questions or concerns.
You’ll sign the necessary legal documents and pay closing costs during the closing process. Once your loan has funded—you’re ready to move in.
Next steps with Austin Capital Mortgage
Buying a house for the first time is overwhelming, even from the start. But you don’t have to go through it alone.
Reach out to the mortgage specialists at Austin Capital Mortgage.
We’ll walk you through the mortgage process, help you avoid common first-time home buyer mistakes, and show you how to buy a house.
Let us put our experience and expertise to work for you.