First-Time Home Buyer? How To Get A Mortgage

Part of the classic rendition of the American dream is being able to own your own home, ideally one that has a white picket fence. In the past, getting a home was more affordable—especially when it came to keeping it affordable on a single salary. Alas, prices skyrocketed, which led to more people struggling with getting a mortgage.


If you’re getting a home for the first time,  it’s important to understand the ins and outs of financing. More specifically, you should be aware of what’s involved in getting a mortgage and know what you will need to do in order to secure financing. This guide will help you understand what to expect.


Are You Ready To Get A Mortgage?

Getting a mortgage isn’t as easy as it once was, but that doesn’t mean it’s out of the question. It just means that most aspiring homeowners often need to prepare before they even put in an application. This checklist will help you figure out if you’re ready to apply for a mortgage:


  • Do you have a credit score that’s above 600? Most mortgage programs will want to work with people above 600 exclusively. The higher, the better off you’ll be. Many top lenders won’t work with people with a FICO score under 700, so beef up your score.
  • Do you make a decent amount of money? You should be aware of how much house you can potentially afford before you apply for a loan. An affordability calculator can help you out here.
  • Is your debt under control? A high debt-to-income ratio can easily disqualify you from most mortgages. You should try to keep your debt under control while you work on getting a mortgage.
  • Do you have a down payment? Depending on the loan type, you might be able to get a low down payment of 3% or less. However, traditional loans require 20% down. 

Should You Apply For Affordable Housing?

Most people assume that you have to make a decent amount of money (over $50,000) to be able to afford a house. If you are a low-income individual, there still might be a way to buy a house. Affordable housing programs exist, and they often allow people with low-to-middle incomes to find a good house for sale.


The easiest way to figure out if you should apply for affordable housing is to see what the program requirements are in your area. Most places will allow the maximum income for applicants to be slightly above the average for the area.


Knowing this is a huge factor in being able to maximize your budget.  This means that people who make $100,000 or more can potentially get affordable housing in New Jersey. So even if you’re not the “typical” applicant, it’s a good idea to look at your local HUD guidelines

Do You Need To Have A Regular Job In Order To Get A Mortgage?

In most cases, mortgage lenders prefer to see people who are traditionally employed. However, that doesn’t mean that self-employed people are immediately denied a loan. In order to get a mortgage as a self-employed individual, you will need to furnish several years of tax filings as well as stubs showing major contracts.


You might also need to go to a portfolio lender to get a mortgage as a freelancer. Thankfully, there are plenty of lending groups that will help you out. If you aren’t sure where to start, talking to a neighborhood real estate agent will help immensely. 

Understanding Your Mortgage Options

There’s no such thing as a “one size fits all” type of mortgage. There are several different mortgage programs that make it easier to find a loan, most of which are backed by the US government. Some of the more popular options include:


  • VA Loan. If you were in the armed forces, you might be able to get a home loan with no money down. VA loans have low rates, are offered nationwide, and require a lower credit score than most others.
  • FHA Loans. FHA loans are literally designed for first-time homeowners, which is why their minimum standards involve low FICO scores as well as a low down payment. You might be able to qualify with a down payment as low as 3.5%. You should try for an FHA loan before any others.
  • Fixed-Rate Loans. As the name suggests, this type of traditional loan will have you paying fixed amounts with the same interest levels over the course of 15 to 30 years. This is a good option for people who want to live in their home for a large portion of their lives.
  • Adjustable-Rate Mortgage. If you want to work with a more flexible type of loan, ARMs are an option. These mortgage rates adjust annually based on the current rates of the mortgage market in your area. These are great for short-term buyers as well as people with low credit scores.
  • USDA Loans. The USDA doesn’t just regulate farms. They also offer home loans to people who want to move to rural areas. USDA loans require no down payment, but require you to have a debt-to-income ratio under 41%. 

What Will You Need To Bring To A Mortgage Loan Application? 

In most cases, a loan pre-approval letter can help get your foot in the door. However, it’s not mandatory. If you want to be more pro-active about finding funding, you will often need to put together your own application—most likely, with the help of your real estate agent. 


That being said, getting a mortgage application together can be a hassle. At the very least, you should expect to furnish the following:


  • Your ID. A state-issued ID is a must. Most will also want to see your social security card.
  • W-2 Paystubs. Lenders will need to see that you’re making an income, and that the income matches what you placed on the application. 
  • 2 Years of Taxes. You may also need to show your side business income from 1099 gigs, as well as any letters showing income from passive means like stock portfolios. 
  • Bank Statements. This can include direct deposits as well as individual income statements. 
  • Letters of Gift. If you’re using a gift as a down payment on a house, you will need to show them the letter that it’s a gift. 
  • Your Credit History. Lenders will pull this for you, but they’ll need your written or oral consent to do so.
  • Rental History. Lenders who are working with first-time buyers want to make sure you can pay your rent on time. So, they may ask for a year’s worth of rent payment checks or a rental letter from a former landlord to prove that you can pay your bills on time. 


Get Started On Your Mortgage Journey Today!

The best way to find out what your options are is to talk to a local real estate agent. Since real estate agents have been through the wringer with multiple clients, they often know what the borrowing situation is like in your area. 


So, no matter what stage you’re in, give an agent a call. They’ll be able to help you figure out if you’re ready for a home—and if so, what you will be able to afford.  

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