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What do mortgage lenders look for in an application?
What financing options are available for first-time home buyers?
- Conventional Loans
- FHA Loans
- USDA Loans
- VA-Backed Loans
- Other Mortgage Programs
Have a specific question about home loans?
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It’s finally happening. You’re in the market for your first home. You’ve scrolled through online listings and maybe even started daydreaming about décor. Maybe you’ve even contacted a realtor and toured some available properties. If so, you’re probably wondering what the mortgage process looks like for a first-time homeowner.
This is where it’s nice to have a financial partner like Spero on your side. Here are some answers to the most common questions our members ask when buying their first home.
What do mortgage lenders look for in an application?
There are a few things lenders want to see before agreeing to lend you money for a home.
One key thing they look for is a strong credit score. Think of your credit score as your “financial reputation.” It gives lenders an idea of how likely you are to pay them back their money. In most situations, you’ll want to have a credit score that’s at least in the 600s to be considered for a mortgage.
Worth Knowing: Here are a few pointers on building and maintaining a strong credit score.
Lenders will also look at your overall finances, including your debt-to-income ratio, employment history, and funds you have saved for a down payment. The combination of these factors gives them a better understanding of your financial habits and your ability to repay the money they loan you.
Most lenders want to see a debt-to-income ratio of 43% or lower, two years of steady employment, and documentation that your down payment funds have been in your account for a while. Two to three months of bank statements will usually do it. Job history doesn't have to be two years at the same place, and time in school or the military often counts.
Before you begin applying for mortgage prequalifications or preapprovals, make sure these pieces are strong. Having your personal finances in line will increase your chances of getting the best terms for your home loan.
What financing options are available for first-time home buyers?
There are multiple options available for first-time home buyers in South Carolina. Let’s review the programs available at Spero Financial.
Conventional Loans
This is probably what most people picture when they think of a mortgage.
Conventional loans come from mortgage companies and financial institutions like credit unions and banks. They aren't backed by the federal government, which means they can be a little harder to qualify for. The upside? If you do qualify, you'll often pay less for your home overall.
Spero offers several conventional loan options. A 15, 20, or 30-year fixed-rate mortgage gives you predictable payments month after month. An adjustable-rate mortgage might save you on interest, and while the rate can shift over time, there's a cap on how far it can move. Whichever you choose, you have the option of paying off the loan early without a penalty.
FHA Loans
An FHA mortgage is insured by the Federal Housing Administration. It's worth considering if you're buying your first home or your credit score isn't where you want it to be yet. Most traditional mortgages want 20% or more down, but an FHA loan can get you in with as little as 3.5%.
You can find more details on FHA loans through the federal government's home loan resources.
USDA Loans
A USDA loan is worth a look if you're buying in a rural area. It offers low or no down payment options and competitive rates, which makes homeownership more reachable. And because it's backed by the government, it's a solid choice for buyers who qualify.
The program has specific requirements around income and location. You can read the full guidelines on the USDA's single-family housing loan page.
VA-Backed Loans
If you're a service member, veteran, or surviving spouse, a VA loan can be one of the most useful paths to homeownership. VA loans are insured by the Department of Veterans Affairs and can be used to build a home, buy one, or make energy-efficient improvements to a place you already own.
Learn more on the VA's home buying process page.
Other Mortgage Programs
The options listed above are just those available at Spero Financial. Check out SC Housing to learn about even more programs you may qualify for.
Have a specific question about home loans?
Spero's lending team works with first-time buyers across South Carolina every day. Fill out a contact form, and someone from our lending team will follow up with you.
This material is for educational purposes only and is not intended to provide specific advice or recommendations for any individual.
