Owning a home of your own is part of the American Dream. But a first-time homebuyer must take diligent steps to be in a position to make what may be their single largest investment. If you are getting organized to secure a mortgage, every first-time homebuyer needs to know these essential things.
Who Qualifies as a First-Time Homebuyer?
A first-time homebuyer is typically defined as an individual who has not owned a home within the past three years. This means that even if you have owned a home in the past but have not done so for at least three years, you can qualify as a first-time homebuyer and may be eligible for certain benefits and assistance programs aimed at helping individuals purchase their first homes. It's important to note that the specific criteria for first-time homebuyer status can vary depending on location and the requirements of different assistance programs, so it's advisable to check with local authorities or program administrators for precise eligibility details in your area.
That being said, getting approved for a mortgage typically requires potential buyers to possess a reasonably sound credit history, reliable income, and money for a down payment. Those who qualify as first-time homebuyers garner perks other borrowers may not.
Benefits First-Time Homebuyers Enjoy
Middlesex Federal is an approved lender for multiple Federal Home Loan Bank Boston's homebuyer assistance programs.* These programs are offered on a first-come-first-served basis with limited funds available. Middlesex Federal Home Loan Specialist can help determine your eligibility and submit a request for funding on behalf of eligible applicants, as applications cannot be submitted directly by the borrower. Be sure to get in touch today if you would like to be considered for a Federal Home Loan Bank Boston First-Time Homebuyer Assistant Program.
Middlesex Federal first-time homebuyers can request $250 off closing costs for new mortgage purchases.** They can also count on Middlesex Federal to help prepare for a successful homebuying journey, offering tips on how to improve your credit score, explain what's involved in the home inspection, and help you choose a finance package that fits your financial needs - now and in the future.
Working with a community bank offers a range of distinct advantages that can greatly benefit customers. Firstly, community banks take pride offering a personalized and customer-centric homebuying experience. As a community bank Middlesex Federal is not just another financial institution; instead they are deeply vested in the community they serve. This local commitment results in decisions made with a profound understanding of the community's unique needs, making local decision-making a prominent advantage. Community banks often provide quicker turnarounds on loan approvals and account services because they have a more streamlined and accessible decision-making process. Also, their in-house servicing capabilities mean that you can enjoy seamless, one-on-one assistance for any issues or concerns that may arise. All in all, working with a community bank offers a level of support, responsiveness, and community involvement that can make a significant difference in your home buying experience.
The benefit of working with a community bank is that we're here for you before, during, and after your loan closes.
Key Steps for the First-Time Homebuyer
It's not unusual for people to get excited about purchasing a home and allow their emotions to get carried away. It's a wonderful life experience, but staying grounded as you make this significant financial decision is crucial. Here are 10 steps to help you successfully buy your own home.
1: Make Sure You are Financially and Mentally Ready
In all likelihood, you’ve run the numbers on how large a mortgage you can afford. This involves estimating household income, monthly mortgage payments, taxes, insurance, utilities, maintenance, and peripheral expenses. But are you emotionally prepared for homeownership?
Ask yourself if you are ready to take on commitments such as mowing the lawn, repainting rooms, making home improvements, and possibly cutting back on leisure spending. Being a homeowner comes with increased responsibility and lifestyle changes.
2: Save For Your Down Payment
Although there are first-time homebuyer programs that allow people to put less than 20 percent down, there may be a catch. Buyers who put down less than 20 percent may incur an additional monthly cost associated with mortgage insurance, otherwise known as PMI. While PMI has many benefits, cutting back on discretionary spending and hitting the 20-percent mark can save you money in the long run.
3: Check Your Credit Score
Your credit score impacts your interest rate. Even first-time homebuyer programs have minimum score requirements. The three major credit reporting agencies that monitor your credit-related activity and your credit history, Equifax, Experian, and TransUnion — are required to provide you with a free credit history report once every 12 months. Take control of your credit history, order your free credit report from each of these credit bureaus. A Middlesex Federal Mortgage Specialist can help you understand how your credit score affects your mortgage rate and provide quick tips on improving your credit score.
Monitoring your credit isn't just for homebuyers. Reviewing your credit can help everyone stay in control of their finances. Learn more about credit building and how to take control of your finances. A better credit score can help you receive the best rate and even a job offer. Monitoring your credit allows you to fix mistakes or catch early signs of identity theft.
If you're ready to become a homeowner, explore your options with our complete guide:
4: Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage is an excellent way to discover your borrowing limit without significantly impacting your credit score. The information will also allow you to explore a Fixed Mortgage versus an Adjustable Rate Mortgage (ARM).
A fixed mortgage locks in your principal and interest (P&I) for the life of the mortgage. By contrast, an ARM usually offers a lower initial interest rate that may vary annually. A first-time homebuyer may opt for an ARM to lower initial costs and refinance later if rates tick up. If they dip, an ARM could result in homeowners paying lower monthly installments. If you are interested in determining how much home you can afford before you start shopping, get in touch with a Middlesex Federal Home Loan Specialist for a pre-purchase review.
5: Find a Real Estate Agent
With your finances set, the next step is to connect with a reputable real estate agent. Having a professional to look after your best interests can help avoid some pitfalls a first-time homebuyer may experience. If your agent is aware of your likes, dislikes, and financial situation, they will be able to search out multiple options that will fit your specific needs. Make sure you work with an agent who understands that first-time homebuyers may need more guidance than someone who has gone through the process before.
6: Start Shopping Around
Searching for a home has never been easier. You can run searches on platforms such as Realtor.com and Zillow, using filters to create a list in your price range, home parameters, and locations. Consider narrowing the list to a few homes that stand out and contact the real estate agent to schedule a walk-thru. Your agent will be a great resource during this time since they will be more familiar with certain neighborhoods as well as builders. Tap into their expertise and insight as you hunt for your first home.
7: Make an Offer
Once you find your dream home, work with your real estate agent to put forward a reasonable offer. The housing market has been hot in recent years, and sellers are fielding offers at or above their asking price. Making an attractive offer can be complicated. Don’t hesitate to ask experienced professionals for advice. When you are determining your budget, this is a key factor that you should also consider. The last thing any home buyer wants to experience is the disappointment of losing multiple homes due to being outbid.
8: Get a Home Inspection
During the home inspection, you may learn the house and property have certain imperfections. Cosmetic issues are to be expected to some extent. However, structural problems or pest infestations are good reasons to request the seller fix the issues or renegotiate the deal.
9: Shop Around for Home Owners Insurance
Conduct due diligence when purchasing homeowners insurance. Insurance policies are a mortgage requirement and can differ significantly in cost and coverage. One of the items to consider when purchasing insurance is total loss coverage. It’s essential the policy will pay for a total rebuild at today’s prices, and not just cover the value of the home.
10: Close On Your Home
You will likely enjoy a final walkthrough before meeting with the various parties to sign off on the legal documents. A real estate lawyer and your agent should be present in case you have any questions. Once everything is signed and notarized, you will officially be a homeowner.
Turn Your Home-Owning Dreams into Reality with Middlesex Federal
With all the excitement that comes with owning your own home, there are a lot of questions that also arise. If you have questions about any of the steps mentioned or if you’re ready to begin buying your first home, reach out to Middlesex Federal's Mortgage Team today!
* Homebuyers Assistance: Middlesex Federal Savings is an approved Federal Home Loan Bank Boston lender. Our Home Loan Specialist will determine eligibility based on the FHLB guidelines and work with eligible applicants that have a signed Purchase & Sale Agreement to complete and submit a request for funding on your behalf. Applications for funding cannot be submitted directly by the borrower. All programs are offered on a first-come, first-served basis, while funds remain available. Some conditions apply, including application approval, income eligibility, and Individual program restrictions. All loans are subject to credit approval. Pre-Purchase Review includes a review of credit report and analysis of income and assets. $250 Off Closing will be issued upon request and must be processed before closing documents are finalized. $250 will be credited to the homebuyer at closing. Offer valid for new Middlesex Federal purchase transactions only. Limited to one per closing.
**$250 Off Closing: $250 Off Closing will be issued upon request and must be processed before closing documents are finalized. $250 will be credited to the homebuyer at closing. Offer valid for new Middlesex Federal purchase transactions only. Limited to one per closing.