Buying Your First Home

What is a First-Time Homebuyer?

The term “first-time homebuyer” sounds straightforward, but there are several conditions that qualify an individual as a first-time homebuyer. According to the U.S. Department of Housing and Urban Development (HUD), a first-time homebuyer is someone who meets any of the following conditions:

  • An individual who has not owned a primary residence for three years. Additionally, if you or your spouse has owned a home but the other has not, then you can purchase a place together as first-time homebuyers
  • A displaced individual who has only owned a home with a spouse
  • A single parent who has only owned a home with a former spouse while married
  • An individual who has only owned a primary residence that is not permanently attached to a permanent foundation in accordance with applicable regulations
  • An individual who has only owned a property that was not in compliance with state, local, or model building codes—and that cannot be brought into compliance for less than the cost of constructing a permanent structure

What to Consider Before You Buy

There are several things to think about before you make an offer on a home. You should start by taking a close look at your credit and finances to figure out how much you can afford. The three major credit bureaus – Experian, Equifax, and TransUnion, give consumers access to one free credit report each year. You will want to be sure not to open any new lines of credit during the homebuying process, as it could negatively impact your credit score and debt-to-income ratio.

Based on your current income and spending habits, will you be able to pay a mortgage each month and cover all other expenses related to homeownership, such as property taxes, insurance, and utilities? Just because you qualify for a mortgage of a certain amount, does not mean that you should spend that much on a home. Your housing expenses should be no more than 30% of your monthly gross income. The down payment, closing costs, and move-in expenses can also be significant barriers for potential buyers if they are not factored in beforehand.

Do you know your rights as a potential borrower? For example, the Fair Housing Act prohibits discrimination based on race or color, national origin, religion, sex, familial status, and disability. If you feel you have been discriminated against, you can file a claim with HUD.

Once you have answers to those questions, you can start thinking about the fun stuff, such as the type of property that will best suit your needs and the specific features you would like to have in a home. Are you looking for a single-family home, townhouse, condominium, or duplex? How many stories would you like it to be? Do you want a basement? There are countless options to consider – sometimes the best thing to do is to figure out your price range and start looking at different properties within that range.

The Buying Process

Now that you are ready to find a home, it is time to explore mortgage options. There are many homebuying programs out there. Look at what is available in your state and determine which ones you qualify for, including mortgage options available through the Federal Housing Administration (FHA), United States Department of Agriculture (USDA), United States Department of Veterans Affairs (VA), and conventional mortgages. You will want to look at first-time homebuyer programs by state, as they vary from place to place.

Have your lender provide you with a pre-approval letter to show sellers and real estate agents you are legitimately interested in purchasing a home. After you have found a property, work with your real estate agent to make an offer. If the seller accepts the offer, you will make a deposit and the home will transition into escrow, which usually lasts around 30 days. During this time, the seller will take the house off the market, and if you do not find any reason to rescind your offer after the home inspection, then you are able to move on to closing. Do not pass on the opportunity to have the home inspected, as it could reveal serious issues that are not immediately visible.

Before you close on a property, you will need to secure homeowners insurance, which helps cover losses and damage to the property should an unexpected event occur, such as a fire or burglary. Most lenders will request that you receive a home appraisal and title search. Private mortgage insurance is also required when the down payment is less than 20% of the purchase price. Closing costs often include loan origination fees, title insurance, surveys, taxes, and credit report charges.

What to Focus on After Buying

Once you become a homeowner, it is a great time to shift your focus back to saving money. Create an emergency fund to cover at least three months of expenses. For example, if your household expenses, including the mortgage, bills, car payments, etc. total $4,000 per month, then you will need to save at least $12,000 in your emergency fund. There are often unexpected expenses associated with homeownership, so you want to make sure you can cover those costs. One way to help prevent unexpected costs is to perform regular maintenance on appliances and systems that require upkeep. Failure to do so may end up costing you more in the long run.

Mortgage Calculator

Home Price
Down Payment
Interest Rate
Mortgage Term
Start Date
Add extra payments
To monthly
Extra yearly

The Mortgage Calculator provides estimated payment information. Actual payments may vary. Speak with a Mortgage Consultant to learn more.

Find a Mortgage Professional

Washington, D.C.   |   Maryland   |   Pennsylvania   |   Virginia   |   West Virginia

Contact Us