Your Guide to First Time Home Buying
Last Updated: November 29, 2022

Your Guide to First Time Home Buying

Ready to buy your first home or at least find out if you qualify as a first-time homebuyer? Whether you’re interested in buying a starter home or your dream home, this guide will give you everything you need to know.

As a first-time homebuyer, it’s essential to learn about your home loan and homebuyer program options, consider your financing range and the type of residence you prefer, and make an informed decision to improve the long-term outcome of your purchase.

You may be a first-time homebuyer, but our in-depth guide will allow you to save money and quickly earn equity on your purchase.

Everything That You Need to Know

While homeownership is a dream for many, many first-time homebuyers don’t know the steps they need to take for a seamless and expedited homebuying process. By following the steps outlined in this guide, you will realize just how easy the process can be and find the right mortgage company and lender for your needs.

How to Qualify As a First-Time Home Buyer

First, let’s find out if you qualify as a first-time homebuyer. While the rules and specifications for state specific loan programs may vary in your region, the general federal guidelines are as follows.

In order to help lenders properly identify first-time homebuyers, the U.S. Department of Housing and Urban Development tracks and defines first-time homebuyers as individuals who meet any of the following criteria: (Source: U.S. Department of Housing and Urban Development, November 7, 2012)

  • Individuals who have had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This may also include a spouse-so if either meets the above test, they are considered first-time homebuyers.
  • Single parents who have only owned a property while married to a former spouse.
  • Individuals who are displaced homemakers and have only owned a property with a spouse.
  • Individuals who have only owned a principal residence not permanently affixed to a permanent foundation – in accordance with applicable regulations.
  • Individuals who have only owned property that was not in compliance with state, local, or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.

In addition to the above requirements, you will need to provide your lender with proof of your income (2 years required) to show that you can pay the mortgage, a down payment (3.5% or more preferred), and a credit score of 620 or higher.

Pro Tip: While these are the commonly used requirements, first-time home buyers can receive additional help through programs that help new buyers with low incomes. Such programs may even let purchasers buy a home with 0% down and a >500 credit score.

Do you qualify? Reach out to us here to discuss your homebuying potential.

5 Reasons to Buy A Home

Whether you meet the description of a first-time home buyer or need more information, these are the top 5 reasons to purchase a home and say goodbye to renting forever!

1. State and National Programs 

First-time homebuyers may qualify for state and national programs that help with their down payment. These programs may also provide tax breaks, a welcome relief during the homebuying process.

Wondering if you qualify? Find out through a specialist or through our online application here. Your options vary per state and will depend on your particular circumstances, including how much money you have to put down and your credit score.

Ask us for your best options, and don’t delay, especially if you’ve already spotted your dream home.

2. Stabilized Payments 

You finally step off the rent roller coaster when you commit to an affordable mortgage payment that’s within your budgeted price range. While home buying prices may go through periods of prolonged increase and cooling-off periods, purchasing a home is a known hedge against inflation.

As you budget over the next year, five years, or ten years, knowing what to expect and not being at the mercy of landlords can be a welcome change.

3. Tax Benefits 

The U.S. Tax Code begins working for you when you purchase a home. As a homeowner, you can deduct the interest you pay on your mortgage, your property taxes, and some of the costs of you buying a home. Of the tax benefits, several of the most significant include the capital gains exemption and the mortgage interest deduction. These will be further explained to you by your mortgage representative.

Don’t delay: Call your mortgage specialist now! (888) 762-7808

4. Savings 

Locking in your monthly housing costs is one of the best investments you can make. While you may not have thought of homeownership as “savings,” purchasing a home results in equity.

With home costs regularly increasing, buying a home (now) will lead to money in your pocket and the ability to purchase a larger home later or cash in and refinance.

Historically, real estate has increased faster and further than inflation, and (when and if you sell the home later) you will get back the portion of the loan you’ve paid. Renting will never provide you with a lump sum or allow you to build equity.

5. Freedom

The home will be yours! Choose your favorite interior paint colors, and don’t worry about hanging photos on the wall.

The only catch? You may still have homeowners association rules to contend with, so use more caution on the exterior of your home, and be sure to read the rules for your homeowner’s association carefully.

Determine Your Financial Health

So, you’ve decided that life as a first-time home buyer is for you and are ready to seal the deal. How do you ensure that your financial health is up to par so you can secure the best rate and loan possible?

While there’s always the option of skipping ahead to an easy-to-complete application here, everything you need to know, including how much house you can afford, how to improve your credit score and prequalify for a loan, and how much you can afford for a down payment.

Credit Score

Let’s begin with your credit score. It comes as no surprise that your credit score makes a difference when qualifying for a home loan. Lenders want to ensure that you have an average to excellent history of paying off your debts and that you can afford the home you’re trying to purchase.

Before applying for a loan, it’s a good idea to check your own credit score to determine whether now is the time to submit your application.

If you find any errors or inaccuracies, dispute them with the credit reporting agencies immediately. Correcting mistakes will improve your score, but this process may take a little while.

Your credit score can range from 300 to 850. While 580 is about the minimum credit score for an F.H.A. loan insured by the Federal Housing Administration, a credit score at this level will limit options and may come with conditions.

A better credit score will improve the rate at which you qualify. If you’re pursuing a conventional loan, a more recommended minimum credit score is 620, with a higher credit score always preferable.

Pro Tip: The fastest way to improve your credit score is to pay down the credit balances you carry monthly and make your bills on time.

Consider setting up automatic billing and paying more than your minimum balance. Not only will this improve your credit score, but you will also reduce the interest rate you pay for carrying a balance.

Consider Your Income and Your Debt

To qualify for a loan, you’ll need proof of your income. “Proof” includes forms like W2s and 1099’s, tax returns, bank statements, retirement account details, and other forms of income.

Your existing debt can and will impact your ability to pay your home loan, which is why lenders will consider your debt as indicative of your financial health. In preparation for buying a home, continue to make an effort to pay off debt and improve your chances of seeming favorable to lenders.

Pro Tip: If you want to buy a home but feel concerned about how much money you’ll have left over at the end of each month, consider asking for a raise or promotion (at your current job) to increase your borrowing power.

Here are some ideas to improve your income.

While lenders don’t always mind you switching jobs (particularly if you have a high-paying, respected career, such as a doctor or attorney), it’s generally best to stay in a stable job when applying for a loan. Let this be a good excuse to be assertive and let your employer know all you offer your company.

Start looking at your options

Promise Home Loans is here to help.

Current Expenses

As you consider your buying power to secure a home loan, another aspect to review (and one that lenders will also consider) is the impact of your current expenses. For instance, if you have a car payment that you struggle to make every month, now may not be the time to purchase a home.

Pro Tip: If your current expenses are manageable and the home loan that you’re about to secure will be the same or less than what you’re paying for rent or still leave you with a surplus, then proceed. If you’re struggling with your current expenses, a home loan will not solve that issue.

Prequalifying for a Loan Vs. Pre-Approval for a Loan

Many first-time homebuyers need to know the difference between prequalifying and gaining pre-approval for a home loan, but the distinction is important to understand.

Prequalify: When you prequalify for a home loan, you find out whether you can begin house-hunting or need to wait.

You will also understand your borrowing capabilities. Prequalifying requires you to provide basic information and complete a credit check for the lender, which allows you to discover your pre-qualification amount quickly.

Pre-Approval: The next step is to gain pre-approval for a mortgage loan, so you feel confident making an offer once you find the home you want to buy. This confidence will provide you with a competitive advantage.

For this type of approval, you’ll need to give the lender a credit check and further proof of your financial details. After you submit all your documentation, you should receive feedback and a decision within about two weeks or ten business days.

To find out instantly if you qualify, apply online.

Why You Should Prequalify for A Loan

In a world where people spend much of their life online and on their phones, prequalifying for a home loan should be as easy as ordering a package from Amazon or getting your groceries delivered through Instacart.

Thankfully, due to technological advancements, the process of applying for a loan or finding out if you prequalify is now just as seamless and digital. Waiting for paperwork is a thing of the past! You can now fill out your application from the comfort of your home.

To find out if you prequalify, you’ll answer a few basic questions about the type of home you want to purchase or refinance, the price of the house, your credit score, and more.

To find your preliminary results, submit your information quickly and easily at If you prefer to find out your results more immediately, call (888) 762-7808 to expedite the process and talk to someone in more detail.

As you work your way through the process of gaining approval for a loan, you will also need to provide the following personal information:

  • Your name, date of birth, address, and phone number.
  • Employment details, along with your annual income and tax returns.
  • Financial information, including your investment and retirement account.
  • Your confirmed loan purpose, desired mortgage amount, and the terms of your loan.
  • Credit check information.

In the past, prospective homebuyers and lenders would wait weeks or months for information to go back and forth, which was slow and frustrating. Thankfully, the modernized method for applying for a loan is faster, exact, and easy. This will give you an accurate idea of your buying power and whether or not you prequalify or are approved to purchase a home.

First-Time Homebuyer Loans & Credits You Should Know About

Buying your first home is exciting but can also bring about many concerns you may not have considered before. While the official I.R.S. the website can provide you with up-to-date information (found here), you’ll also want to speak with a loan officer at Promise Home Loans to ensure you receive the best first-time homebuyer credits available.

Common First-Time Home Buyer Credits Include

1. Federal Housing Administration (F.H.A.) Loans

The advantages of a Federal Housing Administration (F.H.A.) A mortgage loan includes a lower down payment. This feature makes the loan easier to qualify for than a standard or conventional loan.

If you’re a first-time home buyer, an F.H.A. loan is an excellent choice as it will drastically lower the costs that you pay upfront. Additionally, the credit requirement is less stringent, and you can make a 3.5% down payment.

The borrower must also pay a mortgage insurance premium that will protect the lender/titleholder should the borrower default on payments.

2. First-Time Homebuyer Act of 2021:

This act provides a $15,750+ tax credit to first-time home buyers that meet specific criteria.

Amongst the rules to take advantage of this tax credit, you must be a first-time home buyer, not have owned a home in the last 36 months, be within income limits for the area you’re buying in, intend to purchase the home as your primary residence, be 18-years-old or married to someone who is, and not be purchasing the home from a relative.

Check your eligibility and get pre-approved today!

The First-Time Homebuyer Act credit increases by 5% yearly through 2025 (see below). However, the tax credit cannot exceed more than 10% of your home’s purchase price.

This tax credit, should you qualify, will be applied to your tax bill or refund.

  • 2022: Maximum tax credit of $15,750
  • 2023: Maximum tax credit of $16,538
  • 2024: Maximum tax credit of $17,364
  • 2025: Maximum tax credit of $18,233

3. U.S. Department of Veterans Affairs (V.A.) Loans

While an F.H.A. loan may work best for you, another option is a loan from the U.S. Department of Veterans Affairs (V.A.). The loan’s name may seem a misnomer, as it’s not actually the V.A. who issues the loan, but rather that they work to guarantee mortgages with qualified lenders.

This functionality allows Veterans to obtain a home loan without a down payment, and the terms are often easier to get than a conventional loan.

4. USDA Loans

Believe it or not, the U.S. Department of Agriculture offers assistance to home buyers in targeted rural and some suburban areas. While the concept of loan assistance from the USDA leads many to believe that one must live on a farm, that is not the case.

Your loan officer will let you know the limitations in your region. Generally, if your household has fewer than five members, the standard income limit is just below the 100k mark ($91,900 for 2022).

For households with five to eight members, this limit grows to above the one-hundred thousand dollar mark ($121,300 for 2022).

5. Fannie Mae and Freddie Mac Loans

The Fannie Mae and Freddie Mac Loans are well known, with the range of conventional loan products sometimes requiring very low down payments of around 3%.

These differ from an F.H.A. loan, as borrowers are able to stop their mortgage insurance upon building up 20% equity in their home. Borrowers can cancel their mortgage insurance only after 11 years with an F.H.A. loan.

These loans can be the right fit for first-time home buyers, those at retirement age, and even move-up borrowers.

6. Home Renovation Loan Programs

When buying a home that needs renovation, you may be able to find a special loan to help you purchase the home and also renovate it.

These include Energy Efficient Mortgage programs, FHA 203(k) loans, CHOICERenovation Loans, and HomeStyle loans.

While each of these programs has unique features, what they share in common is that they are appropriate for buyers who want to make energy efficiency improvements, tackle fixer-upper programs, and have purchase-and-remodel improvements added to their loans.

7. State-Specific Loan Programs

Your Promise Home Loans mortgage specialist will let you know if a first-time home buyer program in your state is appropriate for you.

For example, California residents may apply for a CalHFA Conventional Loan Program designed to work as a conventional loan (through a credit union or bank) with a low down payment.

A conventional loan is a traditional home loan offered through banks and credit unions; The CalHFA Conventional Loan requires a 30-year loan term through which borrowers can use eligible low-market interest rates.

Have a question about a specific loan or credit? It’s essential that your loan officer is a mortgage and home expert that will understand your needs and the specific loan product. Our talented mortgage officers can help you to qualify for the best loan for you.. Call us today at (888) 762-7808 or prequalify online!

Selecting a Real Estate Agent

There are several methods through which you can select a real estate agent. Some first-time home buyers have a real estate agent that they know personally or from their community and feel most comfortable using.

Other would-be buyers prefer to secure their home-buying potential and find a real estate agent referral through our experts.

While the old way of looking for a home required you to find a real estate agent first (hoping that the agent’s preferred loan officer would offer you the best rate for your future purchase), this is no longer the preferred method.

Today, many home buyers self-originate their loans and let their preferred rate dictate the best real estate agent for their needs.

At Promise Home Loans, we work with any and all real estate agents and use our expert network to specially match you with a real estate agent who is an expert at closing deals and securing the home you’d like to purchase.

5 Tips On How to Choose a Home

A home is the largest purchase you will ever make, and it’s essential to enter into this long-term commitment making the best choice possible for your needs.

While it may sound easy to pick a home you like, this process may feel complicated when you’re only approved for a specific amount or if your community has limited home options.

Below, we will teach you how to know if a home is right for you by figuring out where you’d like to live if the home you chose fits your needs, and whether the home you’re interested in is within budget or requires you to compromise from what you really want.

1. Where Do You Want to Live

Stop and determine where you want to live, whether you’re a city person or better suited for the suburbs or a rural area. Home buyers usually base their selection around the home’s proximity to their job, children’s school, preferred hobbies & interests, and friends or other families.

However, with more and more people working remotely or on a hybrid schedule, you may want to explore areas that you’ve always wanted to live in but weren’t so sure you could.

Pro Tip: It’s easy to look at a map or a city online and decide it’s right for you. Picking a home is an important decision and touring the city and home in advance is important to the decision-making process.

2. What Can You Afford

Your “dream” home might be an expansive mansion, but unless your prequalified or pre-approved loan amount matches your desired home, you won’t get far. Set your search range for homes to a workable loan amount and then determine the must-haves for your home.

How many bedrooms or bathrooms do you desire? Once you’ve decided on those exact features and your favorite geographic location(s), explore the area in-person and online. Get the most for your money and narrow your search to your top contenders.

Pro Tip: To save time, maximize the power of the web and take advantage of online virtual tours that help you figure out what your buying power looks like per home.

3. Think Outside the Box

Don’t limit yourself, and stay open-minded. Look at new construction, older homes, and various house types.

For instance, as a first-time home buyer, you may want to consider buying a townhouse or condominium with your eye on a single-family home later. Or, you may be ready to start with a single-family home but look to older homes or just-built homes in new areas with optimal move-in rates.

Pro Tip: Homes in the city’s historic district may have grants that reduce your property tax. When deciding between old and new homes, consider renovation costs and repairs. Considering these details, your final pick will be a home that is truly a better value.

4. Choose a Healthy House

A home inspection will inform you about potential problems with the home you’re interested in and whether or not it’s still worth your investment.

While a home inspection is important and helpful, keep your eyes and ears open for any other issues your inspector or realtor could have missed.

Pro Tip: During your self-inspection (and professional inspection), check out the home’s vital and costly components that may need to be replaced or repaired.

These fixes or problems may include issues with your plumbing, heat and ventilation, and electrical system. Test everything from the light switches to how each toilet flushes and the water pressure.

5. Consider Homeowners Association Costs

A homeowners association will keep your community looking great and functioning well, as homeowners have to follow the rules and regulations set forth by the association.

However, in addition to homeowners being required to follow guidelines, there is also a cost associated with the homeowners association. This cost usually goes toward the maintenance of the community resources, landscaping, and pool and spa, but the fee may prove prohibitive if it’s too high for your budget.

Pro Tip: Before you make an offer, review the homeowners association guidelines for the community and make sure they work with your lifestyle.

Some communities prevent you from storing a branded work truck or an R.V. on your property, and rules like this may/ may not work with your lifestyle.

If you feel that a community’s rules are particularly restrictive or the cost is unnecessarily high, it’s better to move on than be miserable upon move-in.

Will You Need a Home Inspection?

Believe-it-or-not, depending on the state that you live in, home inspections are often no longer required before you buy a home. What will be required for your mortgage is an appraisal.

The lender wants to make sure that the home you’re purchasing is worth the amount that you’ve agreed to pay, a.k.a. that they’ve agreed to lend you.

What is The Difference Between a Home Inspection and a Home Appraisal?

A home appraisal helps the lender (and you) determine the fair market value of the property. This benefits all parties involved, as you have a realistic figure for the home that you’re about to buy.

Meanwhile, (while home inspections are often not required for your home purchase), you may opt to have one performed for your peace of mind. If so, the inspection will help determine the condition of your future home and provide you with a detailed list of items identified as needing repair.

Pro Tip: Put simply – a home inspection will provide you with a clear understanding of the home’s condition, while the home appraisal will take the home’s condition and appraise comparable home lots and features, the school zone, crime rate, and more.

How Do You Select The Best Mortgage Company?

Rates vary per the mortgage company’s preferred lenders, but rates alone are not the only thing to consider. The ideal mortgage company will be experts at what they do, up-to-date on their technology, and close your loan on time.

1. Technologically Advanced Loans:

At Promise Home Loans, first-time home buyers can apply for a loan anywhere and anytime. You can apply first thing in the morning or late at night and research and apply on any device at any time of the day.

Our expedited, easy, and detailed process will guide and suggest the best options for each home buyer and secure your best rate and the programs that are right for you.

2. Mortgage Experts

We only hire experts with years of experience and a strong home buyer focus. We help to move each home buyer through the process with as much or as little as you require or request. See our reviews here

3. Close On Time

Forget digitally waiting on paperwork from an outdated mortgage company that hasn’t evolved. Our comprehensive digital method allows for a quick, smooth close where communication is readily available at all steps during the process—speed matters in competitive markets when you want to secure your home and loan.

Welcome to Your New Home

Ready for an adrenaline rush? Wait until you’re handed the keys to your new home! There’s nothing quite as good as unlocking your new home, especially as a first-time home buyer.

If you’re ready to fall in love with a new (first!) home, we will ensure that you have first-class service and support at every step and some of the best rates available.

Get Pre-Approved Today

Buy a home or start saving, we make it easy.