How To Get Approved for a Home Loan as a First-Time Buyer

Home Loan

Owning a home for the first time is an exciting opportunity, but it is one you need to approach wisely. Because this is a significant financial decision, you’ll want to learn how to get approved for a home loan that’s affordable for you and your situation.

One survey shows that the median home price for first time homebuyers in the United States is $182,500. These buyers had a median down payment of 6 percent and were 32 years old, on average. With so much at stake, you want to be sure you’re buying the right home with the best loan available to you.

If you’re ready to start the home loan process, TwinCity Lending is available to help you. Contact us now for a free home loan quote.

Home Loan

Are You Financially Ready to Buy a Home?

At the heart of the process of getting approved for a home loan is understanding your overall financial health. Your lending specialist can help you with this process. But it’s best to have a clear picture of your finances already before you begin house hunting.

  • How much money can you commit to each month for a mortgage payment?
  • Are you prepared for increased costs for utilities and maintenance?
  • Have you factored in mortgage and homeowners insurance?

It’s always wise to know your credit score, too. Work to improve your score by using debt wisely and keeping the amount low. All of this helps you to show lenders you’re a good credit risk. 

What Type of Loan Programs Can Help You Qualify?

There are ways for first-time buyers to get approved for a home loan. Several mortgage programs can help support those efforts. Take a look at some options that may fit your goals.

FHA Loans

One of the most commonly used home loans for first-time homebuyers is the FHA loan. Approved lenders, such as TwinCity Lending, can help you qualify for a home loan through this federally-backed program. There are a number of benefits:

  • Lower down payment requirements – You’ll typically need just 3.5 percent of the purchase price in a down payment to secure a loan.
  • Lower closing costs – These fees are less than in conventional loans, reducing how much cash you need to close.
  • Lower credit score requirements – FHA loans can result in approval for some people even with a score of just 580.

VA Loans

Home Loan

VA loans are much like FHA loans in the benefits they offer. The difference is the U.S. Department of Veterans Affairs backs these loans for current or former members of the U.S. Armed Forces. TwinCity Lending can also help you secure these loans. VA loans typically offer:

  • No down payment requirement for most borrowers
  • Low credit score requirements
  • Lower closing costs

If you believe you would qualify for these loans, be sure to speak to your lending specialist about the options. Many borrowers will find this is an excellent way to secure a mortgage as a first-time buyer.

Tips to Help You Secure a Home Loan as a First-Time Buyer

When you meet with a mortgage broker, he or she can provide you with step-by-step information about how to get approved for a home loan. Use these tips to make the process smoother by being prepared:

#1: Seek Pre-Approval Before Looking for a Home

Bring your proof of identity, income, and expenses with you to your loan consultation. This is an opportunity to gain pre-approval, telling you how much you are likely to qualify for a home loan. If you have any concerns about qualifying, be sure to speak to your mortgage specialist about this.

This step is essential in helping you determine a budget for your house hunt. Your broker will be able to give you a good picture of the full financial commitment. Having pre-approval also gives you much better odds of a seller accepting your offer. When a seller sees that a potential buyer already has lending pre-approval, they are much more likely to agree to your offer. This piece is especially critical in hot markets.

#2: Work with a Real Estate Agent to Find the Ideal Home

While your loan is in initial processing, it’s time to find a real estate agent to be on your team. With any home loan, the property will need to pass a full inspection. Your real estate agent will be able to help you find a house that is perfect for you.

If you hope to buy a home that’s a fixer-upper, be sure to talk to your loan specialist about this opportunity. There are options available, such as a 203(k) home loan, that may help with this approval process.

#3: Answer the Underwriter’s Questions

Home Loan

During this time, you will also need to provide proof of income or verify information about the debt you already carry. You may need to provide tax returns and references to your lender, too. The sooner you respond and submit the requested information, the better. If you drag your feet in providing information or signing documents, the home loan process will take a long time.

#4: Bid on Your Home and Close Your Loan

Once you find your desired home and enter into contract, you can then move forward with the loan closing process. Closing on your home means you sign the contract for your mortgage and finalize the purchase. Be prepared that you may need to provide additional information or verify data right up until closing time.

The good news is that your lending specialist will work with you to make the entire process of getting a loan as easy as possible. Your mortgage broker is an expert in all the details. 

TwinCity Lending Is Your Premier Minneapolis Mortgage Broker

Work with our team at TwinCity Lending to learn how to get approved for your home loan. We typically can close on your home loan within two weeks of an accepted offer, as long as all documentation arrives promptly. Reach out today to get started on your first home purchase. 

Teach Your Teens How to Get a Home Loan

How

Home Loan

Having a family discussion about how to get a home loan may not rank at the top of the to-do list as a parent. But it’s a component of one of the most important talks you’ll have with your teen. 

Financial management is critical for every teenager to learn. Instilling good knowledge and skills now may help them avoid problems later. Start by sticking to the basics, and then expand their knowledge to include other topics that may apply to them.

If you’re looking for help on how to get a home loan, our team at TwinCity Lending is just a call away. Give us a call today.

Teach Your Kids About Credit First

An excellent place to start is with a solid understanding of credit. When your son or daughter reaches college and begins to use credit, you want them to make empowering decisions. Unfortunately, from 2004 through 2009, college students saw median credit card debt rise by 74 percent.

You can’t rely on schools to teach students this information, either. Only 17 states require high schools to include a course on personal finance.

Start the conversation with a definition of what credit is, why we should use it, and why we shouldn’t overuse it. Here are some points to talk about:

  • Credit is beneficial because using it wisely shows lenders that a person is a reasonable credit risk. That means they may qualify for loans in the future.
  • Talk about the burden that credit creates when we overuse it. Discuss the cost of using credit, including interest, and how that makes a simple purchase expensive.
  • Also talk about how to choose credit based on interest rates and fees, rather than the available limit.

Talk About How to Get a Home Loan and the Opportunities It Provides

Most consumers need to use a home loan to purchase a house. A great place to start this conversation is with an explanation of the down payment. Many lenders require a down payment, but a young person may have no idea what that is or how they could come up with so much cash. 

This is a great time to discuss savings vehicles that can help your children achieve this goal. You also can explain other aspects of home loans, such as insurance and interest.

What Is a Mortgage Anyway?

Be sure you also explain exactly what a mortgage is. Teach your kids that it is a lending tool for buying a home, also known as a home loan. The value of the house works as the collateral for the loan. That means if the borrower stops making payments, they can lose possession of the property. The lender owns the home until the borrower repays the loan

For older students, it can also be valuable to talk about different types of mortgages. This topic should include FHA loans and VA loans for veterans. Discuss the value of buying a home and why real estate tends to be a solid financial decision for many people. This conversation is also a great way to bring up the importance of buying versus renting a home.

Interest Rates on Home Loans

Home Loan

In your initial discussion about credit, you should be explaining how interest rates work. And it is critical to teach young people what they need to do to qualify for low interest rates later in life. They need to understand how to maintain a good credit score in the years leading up to buying a home. This conversation should include the fact that the actual amount you pay for a home is significantly higher than the sale price, due to interest amounts.

How Does Home Equity Work?

Home equity is an important topic to cover with your teens and young adults. It helps to open their eyes to how they can use credit in their favor. Home equity, which is the amount of the home’s value that is not under a mortgage, is a powerful asset. For example, some people pay off their student loans or other debts using the equity in their home. 

What makes equity so important is that it tends to build up over time. This growth builds funds that a homeowner can access for other needs. With lower interest rates and qualifications, equity can be helpful for the lifetime of owning the home. 

What Makes a Lender Offer a Home Loan to a Consumer?

Drill into your children the value and importance of good credit. Are you sensing a theme here? You can pick up an ad or browse through a real estate website with your child to see the value of various homes. That’s a big number for most teens. Why should a bank loan that enormous amount of money to a consumer to buy a home?

This conversation should include the idea of risk for the financial institution. Lenders offer loans to consumers who are a good risk. That is, they are willing to loan you the money if they feel confident you can pay it back. What makes a borrower a good risk?

  • Steady employment
  • A good credit score
  • A low debt-to-income ratio
  • Good references
  • A larger down payment

How to Pay Off Student Loans – Making the Connection

As college tuition and fees escalate, your teen may be feeling anxious about being able to afford higher education. If your child is set up for success in owning a home, they will have options for paying off student loans with their home equity.

A student loan conversation gives you the chance to talk to your teen about how to pay off any loan. They should learn that it is vital to pay more than the monthly payment and always pay on time. Learning how expensive it can be to pay off debt can help your teen see the value in keeping it in check throughout their lifetime.

You’re Not in This Process on Your Own – Let Us Help You

Whether you’re teaching your child how to get a home loan, pay down debt, or use credit, one thing is for sure. It is all critical information. And for your own lending needs, put your trust in TwinCity Lending. Contact our dedicated team to learn more about how we support you and your growing children on your financial journey.

Call TwinCity Lending now for a free mortgage review at 651-303-4236 or learn more about our services.