How Do I Get a Mortgage? [First-Time Home Buyer’s Guide]

If you’re a first-time homebuyer, read our guide below to help you navigate the process and answer questions that could come up along the way.

Get Pre-Approved

You’ve decided to purchase a home now and need your next step: start with a pre-approval! A pre-approval is a written commitment confirming you qualify for a certain loan amount based on your personal financial history — like your credit and income. Since pre-approvals require this type of documentation, they’re typically the best indicator of whether you’ll qualify for a home loan or not, and for how much.

Getting pre-approved could help you stand out from other buyers. If multiple offers are on the table, sellers will often choose a pre-approved buyer. This indicates you’re more likely to be approved for financing and ultimately follow through with the deal.

Pre-approvals may also help speed up the underwriting step of getting a mortgage.

Set Your Budget

Budgeting helps put your current financial situation into perspective.

Keep in mind your mortgage payment shouldn’t exceed more than a quarter of your total monthly income. This gives you the financial flexibility to cover other expenses, like utilities, groceries, future home maintenance, and other daily costs of living without straining your bank account.

Your debt-to-income (DTI) ratio is also used to show how much mortgage you can afford. Try to keep your total DTI ratio to 43% or less of your gross monthly income.

As you consider this step in getting a mortgage, use our mortgage payment calculator to finetune the best payment for your budget!

Choose Your First Mortgage

There are many types of mortgage loans available so take the time to dig into your options.

Remember to find what works best for your financial situation. Get in the know by taking a look at some of the most popular options:

Conventional Mortgages

These loans are your match if you have a strong credit history, stable employment history, minimal debt, and enough funds to put down at least 3%. Conventional loans are used to finance most properties including primary residences, vacation homes, and investment properties.

Due to being well-qualified, your overall borrowing costs tend to be lower than other types of mortgages, even if interest rates are slightly higher.

Government-Backed Loans

The U.S. government isn’t a mortgage lender, but it does play a role in helping more Americans become homeowners. These loans are protected by mortgage insurance making it easier to offer more flexibility for qualifying.

Some examples of government-backed loans include the Federal Housing Administration (FHA loans), the U.S. Department of Agriculture (USDA loans), and the U.S. Department of Veterans Affairs (VA loans). These loans typically have lower down payments and more flexibility in the qualification process.

Zero-In on Your Down Payment

This is how much you expect to contribute to the purchase of your home. Whatever you don’t put down will likely have to be financed.

Your down payment plays a big part in determining how much home you can afford. The more money you put down, the more home you can afford to buy. If you don’t have a lot of money saved, you could still get a mortgage with little-to-no money down; it would just decrease the amount of house you could afford to buy.

Use our down payment calculator to help you budget towards your goal if you plan to save money before setting out on your search! You can use money from savings, investments, or other sources to make up your down payment.

Work with a Real Estate Professional

Realtors understand how getting a mortgage works and will help you find a home that best meets your needs. They also have access to the information you may not be able to obtain on your own when it comes to specifics in the housing market.

Take time to meet with a few realtors before committing to one and make sure you’re comfortable with your choice. A good realtor will communicate with you frequently, helping you stay focused on homes that meet your specifications and comfortably rest in your price range.

Understand What Happens on Closing Day

One of the final steps toward homeownership is closing on the home you’ve chosen. This process usually takes place four to eight weeks after the offer you made on the home is accepted. This allows time for home inspections, home appraisals, funding, and title searches to be completed.

On the day of closing, the ownership of the property is officially transferred to you. This day consists of transferring funds, providing mortgage and title fees, and updating the deed of the house to your name. You should receive your closing documents about three business days before your scheduled closing date.

Make sure you read them before closing day so you understand what you’re signing and check that there are no errors. Take notes if you have questions or concerns — you may want to address them before the closing.

Be Prepared for the Steps to Getting a Mortgage with Call Federal

The best first-time homebuyers do their homework beforehand and are prepared for each stage of the purchasing process. By following the steps we’ve outlined above, you’ll feel confident buying your first home and make it an enjoyable experience! To keep you on the right path, read below for tips to avoid mistakes in the process.