You’re ready to buy your first home. This is a huge step in a person’s life, often one of several check boxes of “living the American dream.” You’ve probably heard the good, the bad, and the ugly from friends and relatives who’ve traveled this road before you. But it doesn’t have to be painful if you come well-prepared. The more organized you are at the outset in preparing for your first mortgage loan application, the smoother the process can go, and less surprises you will encounter.
You’ve scrimped, saved and now you have a nice chunk of change to use as a down payment. Depending on your house selection, how far that amount will go towards a down payment on the house will dictate the type of loan (government (FHA, USDA, VA) vs. conventional) and interest rates. It will also dictate whether or not you need to pay for Private Mortgage Insurance (PMI). There are some other ways to get around paying PMI insurance through special mortgage programs geared towards new or low-income home buyers. Ask your mortgage loan officer if you qualify. Curious how much home is appropriate for you? Take our Home Buy-Ability Test.
Do you know your credit score? Consumers can find out for free, once every year, via a number of online outlets. Your credit score helps lenders determine your creditworthiness. Paired with your credit score is a debt-to-income ratio that can further demonstrate your ability to take on a new loan payment. Debt-to-income ratio is taken by dividing your monthly debt obligations by your monthly income. This ratio will help you and lenders determine if you can afford the loan commitment amount you are requesting.
Aside from basic photo ID requirements, expect mortgage loan officers to ask you for supporting documentation. This includes tax returns, pay stubs, W-2s (or other proofs of income), and bank statements. If someone provides part of your down payment as a gift, you’ll need a letter from them stating it is a gift and not a loan. You may also be asked to provide proof of renting history. While seemingly tedious to amass, these documents provide an overall picture on your ability to pay on a new mortgage.
During this process, you’ll also have to consider a variety of factors in selecting the right loan for you. Loan officers will explain options such as term length, fixed or adjustable rates, escrow requirements or options, and additional terms. Did you know that by borrowing through a community bank you may have more options on terms? If your property or financial situation is a bit “out-of-the-box,” community banks have been known to have the flexibility and care to help you obtain the loan you need.
Standard Bank offers a Hometown Loan Program for those who have lower incomes due to being retired, a young professional, or in need extra assistance financing their home. If you have good credit and a combined household income that qualifies for the program, this product may be right for you as a home buyer. Hometown Loans require a relatively small down payment and offer competitive interest rates. Standard Bank will even pick up a portion of your closing costs!
Another loan program for first-time home buyers is the First Front Door Grant Program through the FHLBank of Pittsburgh. The program provides up to $5,000 in grant assistance for qualifying home buyers. This program does have limited funding each year, so be sure to ask a local mortgage loan officer if this program is available.
Interested in learning more about your options? First, download our entire Home Loan Solutions booklet to see the Promises Standard Bank Offers Loan Customers and what loan types may best suit your needs. Then, contact one of our mortgage loan officers for expert assistance. They’ll work with you one-on-one to analyze your financial situation and get you on your way to becoming a homeowner!