Buying a home of your own is typically the most significant investment anyone makes during their lifetime. The process can be particularly daunting for a first-generation homebuyer. At Middlesex Federal, we support equal-opportunity lending and hope this information helps first-generation buyers make informed decisions and achieve the American Dream of being homeowners.
What is a First Generation Homebuyer?
A first-generation homebuyer faces unique challenges because their parents or guardians have yet to own a house of their own in the United States. They may not have had experience with the process of buying a home which includes selecting a realtor, open houses, inspections, purchase and sales negotiations, or learning how to properly budget for a down payment. First-generation homebuyers may also face challenges such as financial literacy, lack of family experience, or limited knowledge of resources like payment assistance programs and grants.
While these challenges may seem like an uphill battle, Middlesex Federal is here to help you through every step of the home buying process.
What is the Difference Between a First Generation Homebuyer and a First Time Homebuyer?
All first generation homebuyers are first-time homebuyers but not all first-time homebuyers are first generation home buyers.
Families that may be first time homebuyers, but not first generation home buyers may benefit from growing up in family-owned homes because they are exposed to a lifestyle that involves seasonal and ongoing maintenance, financial planning, and understanding a home is often the single largest financial investment in someone’s life. Parents and grandparents who own their properties are often able to pass down houses, land, and commercial property to the next generation. In many ways, accruing family wealth in this fashion helps children and grandchildren stay ahead of the rising real estate listing prices. When someone with generational assets enters the housing market as a first-time homebuyer, they usually possess a more solid financial foundation.
By contrast, a first-generation homebuyer starts from square one. Not only do community members in this position need to set aside a down payment, they need to tap into financial resources to not only learn the essential steps of the home buying process but also get to know the basics other costs involved with home maintenance and ownership. One of the reasons the Department of Housing and Urban Development and agencies in the Commonwealth are proactively supporting first-generation homebuyers is to end the cycle of working to simply pay bills. When someone becomes the first in their family to purchase a home, it changes the economic dynamic for children and grandchildren. It helps them build equity and this in turn changes their financial future.
If you're ready to become a homeowner, explore your options with our complete guide:
3 First Generation Homebuyer Tips
It’s important to keep in mind that first-generation homebuyers can also take advantage of first-time homebuyer opportunities. When conducting your due diligence, check local, state, and federal programs that support both categories. Before wading into the real estate market, consider taking the following steps to put yourself in the best position possible.
1: Know Your Credit Score Ahead of Time
Credit scores play a significant role in mortgage approvals and mortgage interest rates. Lenders typically review the credit scores from the three big credit companies. Each company uses a proprietary algorithm to develop a credit score.
It’s in every first-time homebuyer’s best interest to secure a free copy of their credit reports from Experian, Equifax, and TransUnion at AnnualCreditReport.com. With these detailed documents in hand, it may be possible to improve your credit score by doing the following:
- Check the information carefully and have any errors corrected.
- Consider clearing up any manageable balances to improve your debt-to-income ratio.
- Ask to have unreported credit usage, such as rent or utilities, added to credit reports in hopes of establishing or increasing your score.
2: Know How Much House You Can Afford
First-generation homebuyers embarking on the exciting journey of purchasing their first house should equip themselves with essential knowledge to make informed decisions. One crucial aspect is understanding how much they can comfortably afford. Mortgage professionals typically use a debt-to-income ratio formula to determine how much money they can lend to homebuyers. Beyond the mortgage approval amount, it's imperative to factor in all the associated costs. This includes not only the principal and interest, but also property taxes, homeowners association (HOA) fees, monthly maintenance, and potential repair expenses. These often-overlooked costs can significantly impact the overall affordability of a home. By meticulously assessing these expenses, first-generation homebuyers can avoid overextending their finances and ensure that their dream home remains sustainable in the long term.
Moreover, it's essential to recognize that just because a lender approves a specific mortgage amount, it doesn't mean buyers have to max out their budget. First-generation homebuyers must strike a balance between what they're approved for and what they feel comfortable affording, while also accounting for daily living expenses. A prudent approach is to create a comprehensive budget that encompasses all aspects of homeownership and daily life, allowing for a realistic evaluation of what they can truly afford. By taking this measured approach, first-generation homebuyers can not only secure a house that suits their needs but also enjoy financial stability and peace of mind as they navigate the exciting world of homeownership.
3: Research First Generation Homebuyer Support
First-generation homebuyers often face unique challenges when navigating the complex world of real estate. Fortunately, there are various resources available to assist them on this journey. Massachusetts, as well as the federal government, recognizes that supporting first-generation homebuying has a clear positive impact on the lives of community members. Partnering with Middlesex Federal can be an invaluable step in this process. Our dedicated mortgage loan officers are committed to helping first-generation homebuyers at every stage, from pre-qualification to closing. We provide expert guidance, tailored financial solutions, and a deep understanding of the specific needs and concerns that first-generation homebuyers may have.
By tapping into our resources and expertise, first-generation homebuyers can gain the confidence and knowledge they need to make informed decisions and achieve their homeownership dreams. With Middlesex Federal as their trusted partner, they can navigate the complexities of the real estate market with ease and assurance, ensuring that their investment not only benefits their own lives but also strengthens the fabric of the community at large.
Middlesex Federal Can Help First-Generation Homebuyers and First-Time Homebuyers Succeed
If you are a first-generation or first-time homebuyer, Middlesex Federal is ready to help turn your dream of homeownership into reality. As an experienced community bank that understands the greater Boston market, we are able to streamline the mortgage approval process and offer families a variety of affordable and attainable home loan options. Contact Middlesex Federal today to get started.