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. 

To Lock or Not to Lock? Why Timing the Real Estate Market Doesn’t Work

Real Estate Market

Real Estate Market

Many people believe that there is a magic formula for timing the market when selling or buying a home. Of course, both buyers and sellers want the best possible price for their side of the transaction. And buyers definitely want the most competitive interest rate they can get.

Some homebuyers can get sucked into obsessively watching the market and interest rates. They may feel that with enough information, timing the market perfectly should be possible.

In actuality, attempting to time your leap into home buying is a lot like trying to catch a falling knife. That is, we don’t advise it. It’s nearly impossible to do and can cause more problems than it’s worth.

TwinCity Lending is your expert partner in home financing. See us when you’re ready to buy a home or want to review your mortgage. We have years of experience in the home loan market and can walk you through the purchasing or refinancing process. Your confidence is our priority throughout your home-buying experience.

Stop Chasing Unicorns

Stressing out about the timing of your home sale or purchase is common. But don’t do it. Trying to time the rise or fall of interest rates to lock in the “perfect” percentage is unrealistic. You will create a lot of work and anxiety for yourself with minimal results to show for it. 

It is much better to spend your time finding a highly-qualified broker to help you navigate the process. When planning your home purchase or sale, keep in mind that several factors  influence property prices:

  • Season – Spring and summer are busier times of the year than fall and winter in the real estate world. Most buyers and sellers want to make their moves in good weather and in between school years.
  • Home supply – When there are more properties for sale than there are buyers, home prices can drop significantly. This situation creates a buyer’s market. When the reverse is true, there are too many buyers for the inventory. Home prices go up as demand increases, creating a seller’s market.
  • The Fed -The cost of borrowing money can influence buyers’ ability to obtain home loan financing. The Federal Reserve sets the prime interest rate, and lenders reflect this in their rates. Many people get caught up in watching what the Fed is planning to do.
  • Exceptional circumstances – Situations like short sales or foreclosures can have drastic impacts on the asking price for a property.
  • Location -The adage of location, location, location has not changed. Hot markets demand higher prices. They always have, and they always will. 

Strategy Without Stress

It’s possible to create and execute a home buying or selling strategy for an excellent experience. It’s wise to have a tentative plan but also recognize that flexibility makes everything work more smoothly.

Do your homework and make sure to work with a broker you trust to get the job done right. You’ll be better prepared to pull the trigger on locking in your mortgage interest rate when a great property crosses your path.

As you launch into your property search, consider the following tips:

Research the Area

Begin now to narrow down your target neighborhoods for home shopping. Check out the schools, parks, and retail areas nearby. Research criteria that are important to you, such as walkability and job availability. Read through the comps that your real estate agent pulls for you.

Consider the home prices in comparison to your budget to help you determine the size of home you can afford. 

Speaking of Budgets, Be Sure to Create One

Visit the TwinCity Lending tools page to find several calculators that will help you determine the monthly payment you can afford. These tools use your current income, down payment, and debt ratio to give you a rough idea of the mortgage you might be able to secure.

You also can enter a range of interest rates into our calculators to see how much house you can afford as the rate changes. Or you can look at how different repayment terms will impact a loan. 

Once you have your budget set, you can start focusing on finding a great home.

Real Estate Market

Consider Buying “Off-Season”

Just like your favorite clothes, homes sometimes go “on sale” seasonally. In cold climates like Minnesota’s, it’s typically harder to sell a home in the dead of winter. Fewer people want to make a move when the snow is blowing, and the roads are slick with ice.

You might be able to take advantage of a seasonal downturn in the market when most homebuyers would rather be sitting by the fire, drinking hot chocolate. Sellers could be motivated to negotiate a lower asking price, saving you money. 

Don’t spend too much time trying to pick the perfect moment to lock in an interest rate. You could miss out on some good seasonal deals on the market.

Keep an Eye on Loan Rates, But Don’t Panic

Being watchful of loan rates is a good idea. However, don’t let a slight rise in interest rate push you into a purchase that you aren’t ready to make. Even if you end up purchasing at a higher interest rate, you’ll likely be able to refinance later on if rates drop.

Assemble Your Finance Team for Quick Action

It pays to have all your financial ducks in a row. When you know that buying a home is in your future, it’s time to do the following:

  • Don’t obsess over timing the market.
  • Start or continue saving for your down payment.
  • Meet with a mortgage specialist like the experts at TwinCity Lending to go over all of the available loan options.
  • Make sure the mortgage team you choose is trustworthy with a strong track record of client satisfaction.
  • Ask any questions you have as you begin to filter possible properties and consider making offers. 

Our team is here to assist you from loan pre-approval through closing. At TwinCity Lending, our priority is your home-buying confidence. We’ll make sure you have full knowledge of all the lending options available to you. 

We can make your home purchase a stress-free, dream-building accomplishment. Call us today and let’s get you into the home you love.