How Do Mortgages Work for First-Time Homebuyers?

By Michael Durr

"Mike is a total pleasure to work with! Great lender who explains everything thoroughly and gets you into a product that works well for you. Highly recommended!!" - Tyler Tomek

Are you interested in buying a home for the first time but don’t understand how the mortgage process works? Your situation is more common than you might think. Most people who have never bought a home before know they need financing, but that’s about where their knowledge about mortgages ends. Fortunately, I’ve helped tons of people buy their first homes, and I know everything you need to know about purchasing your first home. Today, I’ll go over what mortgages are, how they work, and how you can find the best one for you.

1. What is a mortgage? Put simply, a mortgage is a loan from a bank, credit union, or other financial institution to purchase real estate. The borrower agrees to pay the lender back over time, typically over a 30-year span, although the timeframe can vary. You’ll have an interest rate, which determines how much interest you owe the lender on the loan. Ultimately, how much you pay each month is based on the size of the loan, your interest rate, loan terms, whether or not you have private mortgage insurance, and the size of your down payment.

2. How do you get a mortgage? The first step to getting your mortgage is reaching out to a lender and applying. During the process, the lender will ask for financial information, including your credit score, income, and debts. You’ll also need to let them know how big you want your down payment to be. While 20% is the gold standard, you can qualify for a conventional loan by putting as little as 3.5% down. For some loans, like VA loans, you can even put 0% down. Based on this information, your lender can pre-qualify you and estimate what you can afford.

3. Which mortgage type is best for you? Not all mortgages are the same, and each has its own pros and cons. For example, most mortgages have fixed interest rates, but adjustable-rate mortgages change the rate over time based on the loan terms. For first-time homebuyers, I recommend sticking with a standard, fixed-rate mortgage. You also need to consider whether you want a conventional, FHA, VA, or USDA loan. Each of these options are different, so just reach out to me if you’d like to learn more.

If you’re serious about learning more about buying your first home, please call or email me for a free buyer consultation. We can discuss your financial situation, your goals, and how you can qualify for the best loan possible. I look forward to hearing from you!