How do you get first-time buyers approved for a mortgage?

1 Check your credit score

Your credit score is one of the most important factors that lenders look at when evaluating your mortgage application. It reflects your history of borrowing and repaying money, and it can affect your interest rate, loan amount, and eligibility for certain programs. You should check your credit score before you start shopping for a mortgage, and fix any errors or disputes that may lower it. You can also improve your score by paying your bills on time, reducing your debt, and avoiding new credit inquiries.

2 Save for a down payment

Another key factor that lenders consider is your down payment, which is the amount of money you pay upfront for the home. The more you can save, the less you have to borrow, and the lower your monthly payments and interest costs will be. A typical down payment is 20% of the home price, but some lenders may accept less, especially for first-time buyers who qualify for certain programs. However, you should also factor in other costs, such as closing fees, taxes, insurance, and repairs, when calculating how much you need to save.

3 Compare different loan options

When shopping for a mortgage, it's important to compare different loan options and find the one that best matches your financial situation and goals. Some of the most common loan options for first-time buyers are conventional loans, FHA loans, VA loans, and USDA loans. Conventional loans conform to the standards set by Fannie Mae and Freddie Mac, two government-sponsored enterprises that buy and sell mortgages. They usually require a higher credit score and down payment than other loans, but may offer lower interest rates and more flexibility. FHA loans are insured by the Federal Housing Administration and usually require a lower credit score and down payment than conventional loans, but may have higher fees and mortgage insurance premiums. VA loans are guaranteed by the Department of Veterans Affairs and usually do not require a down payment or mortgage insurance, but may have a funding fee and other eligibility criteria. USDA loans are backed by the Department of Agriculture and usually do not require a down payment or mortgage insurance, but may have income limits and geographic restrictions.