First steps for first-time homebuyers

couple standing with realtor in living room of house for sale

As exciting as becoming a homeowner for the first time may be, sometimes it’s difficult to know where to begin. Before you go to a single showing, get ready for house hunting with these first steps.

Review your finances

As a first-time homebuyer, consider talking to a financial counselor before starting your search for a mortgage. LGFCU members can get financial counseling at no cost. A professional can help you evaluate your financial situation and learn what costs to factor in when buying a home. You may find you can afford the down payment and monthly payments. Add closing costs and potential home repairs, however, and estimated payments could stretch your housing budget. 

How much do you qualify for?

Get pre-approved for a mortgage to manage your expectations. Your dream home may fall in the $200,000 range, however, the amount of debt you have in comparison to your gross monthly income — your debt-to-income ratio — might tell lenders you can only safely borrow $125,000. Take away the surprise and calculate how much home you can afford. This way you’ll know if you need to save more or look for a less expensive home.

How much can you actually afford?

Even if you’re pre-approved for your $200,000 dream home, it doesn’t mean you have to spend that much. Doing so may risk your financial security. Think about whether you want this to be your “first” or “forever” home. You might be willing to spend less on a home today and save for a home later that has more things you want. 

Find the money to buy your home

Talk to your loan officer about securing first-time homebuyer program incentives to make your purchase more affordable.

First-time homebuyers mortgage. First-time buyers or those who haven’t owned a home in the past three years may qualify for LGFCU’S First-Time Homebuyers Loan. We offer a 5-year Adjustable Rate Mortgage (ARM) for first-time buyers, with no down payment.

Many ARMs start with lower rates than fixed-rate loans. After an introductory period, your interest rate will typically change, as will the amount of your monthly payment. Consider the possibility of a rate increase at a time when you might not be able to afford it. If you decide to use an ARM, be sure to keep a little extra in your emergency fund in case your payment increases.

Government-sponsored mortgages are available from the Federal Housing Administration (FHA) and require a very low down payment and offer fixed or adjustable rates. Some lenders require private mortgage insurance (PMI), which can be eliminated when you pay down the loan. (LGFCU does not charge PMI.) This PMI needs to be built into your monthly payment budget.

Grants. LGFCU has partnered with the Federal Home Loan Bank of Atlanta to offer up to $5,000 in down payment, closing costs and principal reduction assistance for eligible first-time buyers. For more information or to determine if you qualify for this grant, call 24/7 Member Services at 888.732.8562 or visit your local branch.

Tax credits. Some first-time buyers may be eligible for Mortgage Credit Certificates (MCC) through the North Carolina Housing Finance Agency. This is a federal tax credit for 30 percent of your mortgage interest payment each year with a maximum credit of up to $2,000 annually.

Keep these first-time homebuyer tips in mind to help guide you to a place you’ll enjoy at a price you can afford to pay. 

The advice provided is for informational purposes only.

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