Written by Dan Green
Dan Green
Dan Green (NMLS 227607) is a licensed mortgage professional who has helped millions of people achieve their American Dream of homeownership. Dan has developed dozens of tools, written thousands of mortgage articles, and recorded hundreds of educational videos. Read more about Dan Green.
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This article was checked for accuracy as of September 19, 2024. Learn more about our commitments to accuracy and your mortgage education in our editorial guidelines.
Updated: September 19, 2024
Ask any first-time home buyer, and they’ll tell you—it’s hard to know when you’re fully ready to buy your first home. The process involves both emotional and financial aspects. Buying a home can feel overwhelming, leading to feelings of doubt, concern, and nervousness.
At the same time, it’s an exciting experience, symbolizing a new beginning.
As a first-time home buyer, you likely have a lot of questions, and we’re here to help answer them for you.
Through our website, email newsletter, and YouTube channel, here are some of the most common questions our readers ask.
For many first-time home buyers, readiness to buy a home is often a personal and intuitive decision.
According to the 2022 Buyers and Sellers Generational Trends report by the National Association of REALTORS®, more than half of buyers under age 40 said their primary reason for buying a home was that “it was just the right time.”
Life events such as getting married, starting a family, or simply needing more space often drive the decision. Many renters also seek the freedom to personalize their home, such as by painting or decorating as they wish.
While finances are an important factor, emotional readiness often plays a bigger role than expected. Only 1 percent of first-time buyers said they “wished they had waited” to buy, indicating that many are comfortable pursuing their homeownership goals even if financial conditions aren’t perfect.
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First-time home buyers may be able to purchase a home with little or no money out of pocket, including for their down payment and closing costs.
Government-backed loans such as VA and USDA loans offer 100% financing, meaning they cover the entire purchase price and closing costs. In addition, FHA-endorsed loans can be combined with forgivable down payment assistance, also reaching 100% financing.
Conventional loan programs also allow home buyers to use a cash gift for a down payment and receive help with closing costs, reducing the amount of money buyers need to bring to closing.
The three main financial factors for buying a home are cash flow, credit rating, and savings.
Cash flow refers to the amount of money left over after paying all your monthly bills, such as credit cards, car loans, and any court-ordered payments. Typically, homeowners spend between 25% and 45% of their income on bills.
Your credit rating is based on how well you manage debt and pay your bills. Credit scores range from 300 to 850, and a credit score of at least 500 is generally required for mortgage approval. Even if you don’t have a credit history, you may still qualify for a loan.
Savings refer to the money you’ll have left after buying your home. It’s essential to have at least three months of housing payments in reserve, as emergencies can happen. A healthy savings account provides protection in the event of job loss, illness, or other unexpected expenses.
A first-time home buyer is defined as someone who has not owned their primary residence within the last three years. There are exceptions for single parents, divorced individuals, displaced homemakers, and those living rent-free.
First-time buyers often qualify for special programs that offer discounted mortgage rates, grants, and loans with low down payments, such as the Conventional 97, which allows a down payment of just 3% for those with an average or better credit score.
Yes, many first-time buyers can purchase a home with no down payment.
Government-backed mortgages like VA loans and USDA loans allow no down payment. In addition, certain loan programs combine grants and forgivable loans to offer 100% financing.
Here are some ways first-time buyers can qualify for no-money-down mortgages:
In addition, buyers can use cash gifts to help cover their down payment.
A good time to buy a home is when you’re emotionally ready, financially prepared, and market conditions are favorable for home buyers.
Emotional readiness can be indicated by your desire for more space, preparing for life events like marriage or children, or feeling frustrated with renting.
Financial readiness means having a stable income, a positive cash flow, and an emergency savings fund. Market conditions tend to be favorable unless both home prices and interest rates are rising simultaneously, which has only happened eight times in the past 50 years.
Learn more about whether now is a good time to buy a home.
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We've worked with thousands of first-time home buyers. This post looks at the first-time home buyer questions we hear from a lot of buyers.
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