Tips in buying a house for the first time

Written by Anytime EstimateFebruary 11th, 20226 minute read

If you have previously purchased a house, you know what lies ahead. However, if you're a young first-time home buyer, you have questions.

You probably have friends or relatives who are anguished over the mortgage process. The reason is probably due to inadequate preparation on their part or the failure of the mortgage loan officer to properly prepare them. So here are some tips to make the mortgage application and your home buying uneventful.

The best advice for first-time house buyers

  1. Get your free credit report!
  2. Get your papers in order!
  4. Find a lender who uses the rapid rescore program in conjunction with a credit simulator.
  5. Ask the seller about the cost of their homeowner's insurance policy before making an offer!
  6. Find out if the house requires flood insurance.
  7. Get an estimate of the closing costs before making an offer.
  8. Get a home inspection with hazardous substance testing
  9. Seek out a first-time home buyer program.
  10. Be careful when shopping for an interest rate.

1. Get your free credit report!

The Fair Credit Reporting Act (FCRA) requires Experian, Equifax, and TransUnion to provide you a free copy of your credit report every 12 months if you request one.

"I pay my bills on time, why should I bother?" you might be wondering at this point. Any mortgage loan officer with years of experience will tell you that collection accounts and inaccurate information frequently appear on a consumer's credit report. Your credit score may suffer as a result of inaccurate information. Your ability to secure a mortgage may be jeopardized if you have a poor credit score. Working through an erroneous credit report after applying for a mortgage is difficult, to say the least. Negative information on your credit record is allowed to stay on your report for seven years, while bankruptcy information is allowed to stay on your report for ten years.

What should I do if I find incorrect information on my credit report?

If you discover any inaccurate information on your credit report, immediately contact the three credit reporting companies to dispute it.
Federal law requires credit bureaus to examine a dispute within 30 days.
Contact each credit bureau directly:

P.O. Box 740241
Atlanta, GA 30374-0241
(800) 685-1111
P.O. Box 2000
Chester, PA 19022
(800) 888-4213
P.O. Box 2002
Allen, TX 75013-0036
(888) 397-3742

Do not close or pay off any credit cards, installment loans, or other credit obligations, unless instructed by the loan officer. Available credit, the number of open accounts, the age of the accounts, and other characteristics all go into your credit score. When you close accounts, you risk lowering your credit rating, which is something you don't want. It's also a bad idea to open or apply for new credit.

2. Get your papers in order!

You will provide the lender with your pay stubs for the previous 1-2 months, your checking, savings, and 401K account (s) statements-all pages, even the last page for check reconciliation, divorce decrees, child support, and settlement agreements to the mortgage lender during the mortgage application (or pre-approval). Do you have a complete copy of your last two years' income tax returns and W-2s?

Obtain copies of your W-2s if you have misplaced them. If you don't have copies of your tax returns, contact the IRS at 1-800-908-9946 and ask for a transcript of your past two years' returns. The lender may only require a tax return transcript and not a complete copy of your 1040. Are you a member of a labor union? If that's the case, make sure you have all of your pay stubs and documents from the previous two years, as well as your wages for the current year.

For the last two years, the lender will need the entire address, phone numbers, and employment dates for all employers. Do you have a copy of your first-grade class photo? Dig it up; the underwriter might be interested in it as well. Underwriters want everything. It's the bank's money, so if you want a loan, you must follow their rules, regardless of whether they make sense.

3. Obtain a pre-approval rather than a pre-qualification.

Although the terms pre-approval and pre-qualification are frequently used interchangeably, they have two separate meanings. Pre-qualification means that someone has looked through your finances (assets, income, and debt) and determined that you are qualified to buy a property in a certain price range.
Pre-qualification is nothing more than a "gut feeling" that you'll be approved for a loan.

A pre-approval includes verification of your income, debt, income, and credit score. The lender will look at your pay stubs, W-2s, bank records, and credit report. The pre-approval has the appearance and feel of a real mortgage application. The lender will look over your W-2s, bank statements, most current pay stubs, and other documents.

The lender can assess the amount you can borrow and which loan program is "ideal" for you based on your financial circumstances once you've been conditionally accepted. A lender's pre-approval letter outlining your financial qualifications is typically issued. A pre-approval letter is usually valid for 60 days. After 60 days, the lender may demand you update your bank statements and pay stubs. Having a pre-approval provides you with an advantage over other home buyers when you make an offer. Pre-approval implies that you are likely to be approved for a loan.

4. Find a lender who uses the rapid rescore program in conjunction with a credit simulator.

Look for a lender that uses a credit simulator and a rapid rescore tool. A few points in your credit score can have a significant impact on your interest rate and loan program. Whether you like it or not, your credit score is one factor that influences your interest rate and, in certain cases, the loan programs that are available to you. To improve your credit score, some lenders will use credit score simulators and credit rescoring updates.

5. Before making an offer, inquire about the cost of the seller's homeowner's insurance coverage.

You might be shocked to learn that a prior owner's insurance claim can affect the cost of homeowner's insurance. If the seller filed a claim with their homeowners' insurance company, you may have to pay a higher rate as a result of their claim. The cost of a homeowner's insurance policy and its monthly cost can be considerably influenced by factors such as location, age, and architectural style. Inquire about the seller's insurance company and agent, as well as the cost of insuring the home.

6. Find out if flood insurance is required for the home.

Did you know that if you own a home in a flood zone, lenders will require flood insurance? Did you know that flood insurance costs on average $750 per year? Every month, that nice little creek in the backyard might cost you an extra $100. Take a few minutes before making an offer on a house to determine if it is located in a region that requires flood insurance.

7. Before making an offer, get an estimate of the closing fees.

Request a loan estimate from the mortgage lender (or lenders) before applying for a loan and placing an offer on a home. A loan estimate is a document that lists all of the costs associated with purchasing a home.

8. Obtain a house inspection that includes a hazardous substance test.

Having a professional inspect the house is unquestionably in your best interest, but you should also have a home inspection that includes asbestos, radon, mold, and any other potentially harmful conditions. You'll pay a bit more for testing, but think about the repercussions if you (or someone in your family) gets sick as a result of a dangerous condition.

9. Seek out a first-time home buyer program.

There are various programs for first-time home buyers. Some first-time (and non-first-time) programs provide grants to help with down payment and/or closing costs. Speak to a HUD counselor to assist you with your purchase. First-time home purchasers can also get help from the Federal Reserve Banks. Grants for first-time home buyers are available from the federal government.

10. When looking for an interest rate, be cautious.

The search for a cheap interest rate or loan program should be limited to a few days. A "hard inquiry" occurs when a lender views your credit report in response to a credit application. Credit scores are affected by hard enquiries. Applying for many credit accounts in a short period of time can hurt your credit score and make lenders think you're a riskier borrower. Furthermore, some credit-scoring models may consider your recent credit behavior.

There is one exception. If you are looking for a new car or mortgage loan, or a new utility supplier, numerous inquiries for such purposes are generally regarded as one inquiry for a specific time period (typically 14 to 45 days, although it may vary depending on the credit-scoring model). This allows you to compare several lenders and determine which loan terms are best for you. It's vital to note that this exception doesn't usually apply to other sorts of borrowing, including credit cards. is the source of this information.