First Time Home Buyer Steps

Step 1: Get Your Finances in Order

Getting your financial house in order is the crucial first step. It sets the foundation for a smooth home-buying journey.

• Check Your Credit Score: A good credit score is key to securing a mortgage with a favorable interest rate. Lenders often look for a minimum score of 640 for conventional loans and 580 for FHA loans, but a higher score can save you a significant amount of money over the life of the loan.
• Calculate What You Can Afford: Use an affordability calculator to determine a comfortable price range. Remember to factor in not just the mortgage payment, but also property taxes, homeowners insurance, potential homeowner association (HOA) fees, and the cost of maintenance and repairs.
• Save for a Down Payment and Closing Costs: While a 20% down payment is ideal to avoid private mortgage insurance (PMI), many programs allow for much less. Closing costs typically range from 2% to 5% of the home’s purchase price.

Many programs are designed to help first-time buyers overcome common hurdles like down payments and closing costs.

• THDA’s Great Choice Home Loan: This program offers a 30-year, fixed-rate mortgage with a low interest rate to eligible first-time and repeat homebuyers. It has specific household income and purchase price limits that vary by county.
• THDA’s Great Choice Plus: If you qualify for a Great Choice Home Loan, you can also get down payment and closing cost assistance through Great Choice Plus. This comes in two forms:
  • Deferred Option: A forgivable second mortgage of up to $6,000 with a 0% interest rate. The loan is forgiven at the end of the 30-year term if you don’t sell or refinance the home.
  • Amortizing Option: A second mortgage of up to 5% of the sales price (max $15,000) that is paid in monthly installments over 30 years with the same interest rate as the first mortgage.
• Homeownership for Heroes: This THDA program offers a 0.5% reduction on the Great Choice Home Loan interest rate for active and retired military members, law enforcement officers, EMTs, paramedics, and firefighters.
• Homebuyer Education: THDA requires all borrowers using their programs to complete a homebuyer education course. This can be done online or in a classroom setting through an approved counseling agency. It is highly recommended and can help reduce the odds of foreclosure.

You can learn more about these programs on the official THDA website. You can also search for a list of THDA-approved lenders to begin the process.

Pre-approval is a vital step that shows sellers you’re a serious and qualified buyer, giving you an edge in competitive markets.

• Credit Check: Your lender will review your credit history and score to determine your eligibility and interest rate.
• Official Pre-Approval Letter: This document specifies the maximum amount you can borrow, giving you a clear budget for your home search.
• Show Sellers You’re Serious: A pre-approval letter signals to sellers that you are a qualified and serious buyer, making your offer more appealing.

An experienced real estate agent will be your guide through the market, helping you identify and evaluate properties.

Your real estate agent will help you determine a competitive offer. If the seller accepts, you will make a good-faith deposit and enter into a contract. You will then want to schedule a professional home inspection to check for any major issues. This gives you an opportunity to negotiate repairs or, if necessary, back out of the deal.

Work with your lender to finalize your loan, and they will arrange for a home appraisal to confirm the property’s value. Once everything is in order, you’ll sign all the necessary paperwork, pay your down payment and closing costs, and get the keys to your new home.