A Guide for First-Time Homebuyers

Purchasing your first home can be an exciting experience. As you pursue this goal, there are important steps to keep in mind before you enter the housing market. In this article, you’ll find tips for preparing for homeownership and an introduction to the homebuying process.

Before you enter the housing market

If you are a first-time homebuyer, we recommend that you review your budget and overall financial situation as you prepare to buy a house. Take into consideration items such as your overall budget, homeowner’s insurance, how much you could afford to pay monthly, among other things. A few steps you can take to get started include:

Building your savings

Most experts suggest that buyers save up to 20% of a home’s purchase price to use as a down payment. By contributing 20%, you may be able to avoid having to pay private mortgage insurance as part of your monthly mortgage payments. If putting down 20% is not possible or if you find saving for a down payment challenging, check out our article, “Tips to Save for a Down Payment on a New Home.”

Checking your credit history

A credit score is very important to lenders as it indicates the likelihood of an individual to make loan payments on time. Credit scores range from 300 to 850, and the higher your score, the more favorable terms you may be able to get with your loan. Mortgage lenders generally require a credit score of at least 620, and some lenders may offer loans with a lower score. If you do not have the credit score you want, we offer advice in our article “Home Buying with Less than Ideal Credit.”

You’ll also want to review your credit history by requesting a free annual credit report from each of the three major credit bureaus, Experian, Equifax and TransUnion, at annualcreditreport.com. Obtaining your credit report will give you the opportunity to make sure everything is accurate and that nothing has been reported in error.

Getting prequalified

Prequalification is a simple, free process in which a lender can provide you with valuable insight on what your potential loan amount. Being prequalified also signals to sellers in a competitive market that you are serious about purchasing a house, which may give you an edge in the event they receive multiple offers. Depending on your situation, you may be eligible for financial assistance programs or tax benefits. Be sure to ask your mortgage lender about these options.

The basics of the homebuying process

Armed with a sound budget, you can begin shopping for your future home. It is highly recommended that you seek support from a real estate agent who is knowledgeable of the local market and can help narrow your search to homes that fit your lifestyle and budget. To help you identify your housing needs, ask yourself the following questions:

• What type of space do I need?
• How many bedrooms and bathrooms are ideal?
• How close is the nearest school, medical facility or shopping area?
• Am I willing to take on renovations, or do I want a house that is move-in ready?
• Are there any must-haves, like a garage, outdoor living space or pool?

When you have found the house you would like to purchase, you and your agent will agree on an offer to submit to the seller and then work through any negotiations that may arise from results of the home inspection. Having an inspection is a key step in the process, as it can help identify any issues before you move forward.

If the buyer and seller agree to the offer, you will pay earnest money to the seller, which is an upfront deposit upon purchasing a home. You will apply for your mortgage loan, and your lender will guide you through every step of the process. You will need to provide certain documentation, like verification of employment, proof of income and a listing of your assets and debts, as well as other required documents, with your application.

Closing the deal on your new home

The final step in the homebuying process is the loan closing, and it often requires an attorney to complete the final paperwork and ensure the payment of loan fees, title insurance fees and taxes to the appropriate parties. Once your deal closes, you will receive the keys to your first home. Congratulations!

The mortgage professionals at Trustmark are experienced in all types of home loans and are ready to help make your homebuying journey a rewarding and fulfilling experience. To learn more, visit our Homebuyer Knowledge Center or contact your local Trustmark mortgage expert today!