What First Time Home Buyers Need To Know About Mortgages in Houston

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It’s exciting when you decide you are ready to buy your first home. This is a significant milestone and one of the biggest purchases you will ever make in your entire life. At the same time, first-time home buyers Houston also frequently feel apprehensive about the purchase. Taking out a mortgage means borrowing a huge sum of money. You may be concerned over whether you can afford it or about meeting the sometimes exacting qualification requirements.

We are mortgage lenders Houston who are excited about helping you finance the purchase of your first home. We know that taking out a loan of this magnitude may be a new experience for you, and we want you to understand your options with the following guide.

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First Time Home Buyers Houston May Qualify for More Than They Can Afford

Your eligibility for a mortgage is based on factors such as your debt-to-income ratio, payment history, and your credit score. It is common for first-time home buyers in Houston to qualify for up to 43% of your debt to income. In other words, when you add up all the bills that you pay to your creditors per month, including your mortgage bill, the total may be up to 43% of your gross monthly income.

Be careful, though. Just because you can afford to take out a large mortgage doesn’t mean that you should. The 43% figure only accounts for your debts. There are other monthly expenses that you are responsible for:

  • Food
  • Clothing
  • Entertainment
  • Medical or veterinary care for your household
  • Tax obligations
  • Retirement savings

All of these factors must be taken into consideration when determining an affordable mortgage amount. You can get into serious financial trouble later if you automatically take out the largest mortgage for which you qualify without a careful evaluation of your finances first.

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First Time Home Buyers in Houston May Not Need a Significant Down Payment

A down payment of 20%, or one-fifth of the total purchase price, is often recommended as appropriate for first-time home buyers. Even with Houston home prices being below the national average, this can be an unattainable goal. The good news is, in most cases, a 20% down payment is not necessary to secure a mortgage. Depending on the loan you choose, you may only need to make a down payment of up to 3.5%. With some mortgage products, there is no down payment required at all.

While this makes mortgages much more attainable for people of modest means, there is a tradeoff involved. First-time home buyers Houston who make a low down payment typically have to pay mortgage insurance as part of their monthly mortgage payment. This is separate from the homeowner’s

policy that you have to obtain to secure your mortgage, protecting you from damage to your property. You must factor both the mortgage insurance and the homeowner’s insurance premium into your monthly mortgage payment when determining whether you can afford it.

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Houston First Time Home Buyers May Have Different Mortgage Options

There are different types of mortgage loan products available, and depending on your background and your status as a first-time home buyer in Houston, you may qualify for more than one.

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FHA Loans

Loans by the Federal Housing Administration are available to first-time home buyers and those who may not qualify for a conventional loan due to low income or a low credit score. This type of loan typically requires that you make a down payment of at least 3.5% of the purchase cost, and you must pay mortgage insurance to the FHA unless your down payment exceeds 20%.

VA Loans

Current military members and veterans may qualify for a VA loan. These loans usually require no down payment because the Department of Veterans Affairs backs them. Instead of mortgage insurance, you pay a VA guarantee. An upfront funding fee also applies.
VA Loans
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Conventional Loans

This is the traditional type of mortgage available to those who meet eligibility requirements. With mortgage insurance, your down payment for a conventional loan may be as little as 3%.

To do list of First Time Buyers

A Mortgage Can Be Used for More Than Buying Your First Home In Houston

You do not necessarily have to buy an existing home to get a mortgage. For example, there are also loan products available to fund the purchase of land and the construction of your own custom home.

You May Qualify for First Time Home Buyer Benefits Even if You Have Owned a Home Before

The U.S. Department of Housing and Urban Development sets several conditions for first-time buyer status. If you meet any of the requirements, you qualify for benefits even if you have owned a home before. For example, if you have owned a home before but your spouse has not, or you have only owned a home with a spouse from whom you are now divorced. You may also qualify for first-time home buyer advantages if you have not owned a principal residence for the past three years.

Our goal at Rock Mortgage is to make the process of purchasing a home as stress-free as possible through constant communication and a customer-first approach. It is our privilege to help you finance the purchase of your first home. Contact us to start your application.

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