How to Qualify to Buy a House as a First-Time Buyer

Due to the economic downturn in 2008, it has never been more difficult to buy a house. Banks, determined not to repeat the mistakes that led to the financial meltdown, have reduced their willingness to lend and only want to deal with the most highly qualified customers. If you're a first-time homebuyer, it can be tough to meet the criteria set forth by the banks. Fortunately, there's plenty you can do to help get yourself qualified.

Instructions

1. Order a copy of your credit report from www.annualcreditreport.com and review it for any inaccuracies. Dispute any errors with the credit bureaus. In order to qualify for a good mortgage rate, you need your credit score to be as high as possible. Knowing where you stand in terms of credit can help you as you prepare to buy your first home.

2. Save for a down payment. A 20 percent down payment was once required for the purchase of a house, but now the amount can be as little as 5 percent. That said, even 5 percent of a home's worth is a substantial amount, so save everything you can. If you're having trouble saving money, try using a budgeting tool like Mint.com or Quicken software.

3. Determine how much you want to spend on your house and how much you can afford. You're going to be paying this house off for the next 30 years, so it's important not to over-extend yourself. Look at the houses in your area and see if the amount you want to spend corresponds with the quality of home you were expecting. If it doesn't, consider buying a house in an area where the price of real estate is cheaper.

4. Get yourself pre-qualified for a mortgage. Pre-qualification lets you know what's feasible given your credit score and down payment. Completing this step helps to ensure that you won't get your heart set on a house, only to find out that you can't afford it.

5. Look for a home, knowing what you're approved to spend on a house. From this point on, it's all about finding a house you're comfortable with and that you'll be able to live with for the foreseeable future.

Tips & Warnings

• The government has done a great deal to help first-time homebuyers. You may be eligible for a FHA loan, which is designed specifically for a first-time buyer. FHA loans offer reduced monthly payments and may be easier to qualify for than traditional mortgages. If you can't seem to find a house that fits your budget, look into homes that have been through foreclosure.

• Be very careful not to borrow too much when purchasing your first home. Millions of people have purchased homes believing they could handle the monthly payment, only to find that they couldn't and suffered foreclosure as a result. If you aren't sure of your ability to meet your obligations, set aside the amount of your proposed mortgage payment each month for six months. If you can pull it off, you'll not only feel better about your investment, but you'll also have more to put down on your new home.

References

• AOL Real Estate: A Buying Guide for First-Timers; Carol Viznant; October 17, 2008
• New York Times: Mint.com Expands Into Financial Planning Tools; Jennifer Saranow Schultz; June 30, 2010
• Wells Fargo Home Mortgage: Prequalification and Application Process
• Bank of America: Home Loan Information for First-Time Homebuyers

Resources

• Read this Article in Spanish
• Annual Credit Report: Home
• HUD Homes: Home