The Beginner's Home Buying Guide: Tips for First-Time Buyers

Understanding the Home Buying Process

Having been a top producer in the mortgage industry with significant expertise, I can break it down for you in a way that’s simple and easy to understand. If you’re looking to buy a home, these are the three biggest factors that lenders consider:

Three Biggest Factors in Buying a Home

1.) FICO Score

Generally, you want at least a 620 FICO score, but the lower your score, the higher your interest rate will be.
A higher score can help you secure better loan terms and a lower monthly payment.

2.) Debt-to-Income Ratio (DTI)

Your DTI has nothing to do with the balances of your debt—it’s based on the amount of money you pay monthly on your credit lines (minimum payments).
To calculate your DTI, divide your total monthly debt payments by your GROSS monthly income. Your DTI should be less than 43% to qualify for a mortgage.

Example:

Credit card 1 = $50/mo
Credit card 2 = $50/mo
Credit card 3 = $50/mo
Credit card 4 = $50/mo
Car payment = $300/mo

Total liabilities = $500/moGross monthly income = $2,000

500 ÷ 2000 = .25 = 25% DTI

💡 Phone bills, utilities, and other non-credit payments are NOT included in your DTI.

3.) Down Payment

The bigger your down payment, the better. A 20% down payment is ideal because it eliminates the need for private mortgage insurance (PMI).
If receiving a down payment as a gift, you will need documentation stating that it is a gift and does not need to be repaid.
If using your own savings, you’ll need bank statements showing the gradual accumulation of funds.

First-Time Homebuyer Programs & FHA Loans

First-time homebuyers can qualify for FHA loans, which require:
- 3.5% down payment
- Minimum FICO Score of 580
Many state housing programs offer assistance! 💰
- Example: South Carolina – If you have a 640 FICO score, you may qualify for a 0% interest loan for your down payment, which is forgiven after 10 years of occupancy.
- Other states have similar programs, so check with your local housing authority for options.

Essential Home Buying Tips ✅

Check your credit report for free at AnnualCreditReport.com. This site allows you to access one credit report per bureau annually.
Collections: Pay them off if possible. Medical collections are often not counted against you by most lenders.
Hard inquiries from credit applications fall off after two years, so be mindful before applying for multiple loans.
Get pre-approved BEFORE speaking with a realtor to understand your budget and buying power.

🏡 Buying a home is one of the biggest financial decisions you’ll make! With the right preparation and knowledge, you can make the process smoother and more rewarding.