First Time Homebuyer FAQs & Information About First Time Home Buyer Programs in NY
The home buying process can be intimidating, especially for first time homebuyers! From determining a comfortable price range and finding the right home to obtaining a mortgage and closing on the sale, there’s so much to consider.
Here, we provide the answers to some of the frequently asked questions many first time homebuyers have to make the process of buying your first home a little bit easier!
Preparing to Buy a Home
How much money do I need to have to buy a home?
The amount of money you need to have in order to buy a home depends on the purchase price and the loan program you qualify for. Some programs have 100% financing and others have a low down payment. Your best option is to call a licensed Mortgage Loan Originator to see what program you qualify for and what your options are.
How much can I afford to spend on a home?
The answer to this question is different for each individual. How much you can afford to spend on a home depends heavily on your income, expenses, and the mortgage programs you qualify for. If you’re wondering if it’s time to stop renting and buy a home and you are curious as to whether or not you can afford a home, we recommend meeting with a Mortgage Loan Originator. They can help you to learn about your options and will work with you to determine how much you can reasonably spend on a home after evaluating your unique situation.
What if I don’t have enough money for a down payment?
With some loan programs, a down payment is absolutely necessary. Some programs like VA Mortgages and USDA Mortgages allow 100% financing. Outside of specific 100% financing programs, a down payment will be required. The good news is, however, that many mortgages no longer require you to put 20% down, making down payments much more manageable for most first time home buyers.
If you are short on funds, some programs allow you to use a “gift” for a down payment. There are rules regarding how gifted funds can be used, so it’s best to speak with a Licensed Mortgage Loan Originator before you try gifting the funds. Gifts are normally from a family member but there are exceptions.
How far in advance should I determine which mortgage options I pre-qualify for?
The earlier the better! If you think that next year you may want to buy a home, start the process as soon as possible. Many folks look into the mortgage process after they start looking at homes, but this method can lead to disappointment. You should know what you qualify for ahead of time so you know what prices you can afford. Getting pre-qualified before you start the process will allow you to work closely with a realtor to find homes that are within your range.
Starting the process in advance can also help you if you need credit repair. Many Mortgage Loan Originators can give you tips and suggestions on how to increase your score so you are ready when the time comes.
Who is involved in the home buying process?
There are quite a few individuals and professionals involved in the process of buying a home in New York. Understanding who these people are and what their role is in the home buying process is can make purchasing a home seem a bit less daunting and more manageable.
Check out our guide to who is involved in buying a home for information about the people involved in the home buying process.
Qualifying for a New York Home Loan
How much of a home loan will I qualify for?
The home loan amount you will qualify for depends on how much you earn and how many other monthly obligations you have. Each loan program has guidelines that set benchmarks for “Debt-To-Income” (DTI) ratios. Your monthly earnings compared to your Principal, Interest, Taxes, and Insurance is one piece of that ratio. We recommend contacting a licensed Mortgage Loan Originator to help you understand exactly what you will qualify for.
What does my credit score need to be for me to qualify for a home loan?
There are many factors to consider regarding qualifying for a home purchase. Your credit score is only one part of the equation. Typically we like to see a credit score over 620 to qualify, however, there are exceptions that will allow you to qualify with a lower score. To determine your qualifications, you have to factor in your credit score, your monthly obligations, income and employment history, assets for down-payment along with assets for reserves. The combination of these factors will determine whether or not you qualify for a mortgage.
Will my employment history impact my ability to qualify for a home loan?
The short answer to this question is yes, your employment history does impact your ability to qualify for a home loan. Being employed for two consecutive years at one job is ideal, but that isn’t always necessary. Many lenders also view a two year history in the same field or line of work without any gaps favorably as well.
If you are straight out of college or trade school and you entered the work force in the field you studied, many banks will use the school as part of your employment history. They most likely will require transcripts for proof of schooling.
There are many different scenarios that one could have when it comes to job history including unemployment, 1099 job to a W2 job, W2 job to a 1099 job, self employed, pension, social security, disability, etc. If you have something outside of the “two year work history” it is best to work with a Licensed Mortgage Loan Originator to find the appropriate loan program for you, as certain loan programs can be more lenient than others regarding your work history.
I have bad credit. Can I still qualify for a home loan?
Having poor credit does not mean you cannot qualify for a home loan. Compensating factors may strengthen your file to the point where poor credit does not disqualify you. If you have a good length of employment making steady income, your debt-to-income is very low and you have a large down payment with reserves, it may be possible for you to qualify for a home loan despite your bad credit rating.
If you need some work to get your scores up, many Mortgage Loan Originators can give you suggestions on what your next steps should be to try to increase your credit scores. Different loan programs are more lenient with credit scores as well, so having your credit checked in advance will help identify which loan program may be best for you.
Can I get a mortgage if I’ve had a Bankruptcy?
Yes, you can. Generally there is a waiting period based on the type of bankruptcy you have had (Chapter 7 vs. Chapter 13). However, each Loan Program is different. Most of the time, you are eligible for a home loan if you have had a Bankruptcy in the past but have re-established your credit profile. Your Mortgage Loan Originator can review your credit profile to determine if you are eligible for a home purchase.
Can I get a mortgage if I am self employed?
Yes, you can get a mortgage when you are self employed. Banks generally like to see at least two years of self employment, although there are some exceptions.Your tax returns will be needed if you are self employed and looking for a home mortgage.
Do I have to pay off old collections to qualify for a home loan?
There is no simple answer to this question. There are many types of collections from Medical to Credit Card and each are handled differently. You can obtain a mortgage with a collection on your credit report; it all depends on the circumstances surrounding your collection and which program you are using for your mortgage (Conventional vs. Government Program).
The best way to determine if you have to pay off old collections is to have your credit report run by a Licensed Mortgage Loan Originator so they can evaluate your collection and advise you of the best course of action.
The New York Mortgage Process
What documentation should I collect ahead of time, before starting the mortgage application process?
It is a very good idea to have your documents ready when you begin the mortgage process. This allows your Mortgage Loan Originator to verify your income and assets and catch anything that may come up during the process. It is beneficial to try to collect the following documents ahead of time:
- W2’s/1099’s for the past two years (every job)
- Last 30 days pay-stubs
- Two months bank statements
- Any retirement statements that you have
- Tax returns (last two years)
How do I start the mortgage process? What do I do first?
When you’re ready to begin the process of obtaining a home mortgage, the first step is to contact a Licensed Mortgage Loan Originator. You can find one on NAMB.org or through the NMLS Resource Center on-line. Your Mortgage Loan Originator (MLO) can start the process by taking a Mortgage Application. This application will include a history of your employment, your income and assets, your current living situation, a credit report, along with other relevant questions that may affect your ability to get a mortgage.
The MLO will be able to give you an idea of how much you can afford based on the completed Mortgage Application. If possible, try to have your W2’s (last two years), pay stubs (30 days worth), and bank statements (2 months), so the MLO can verify your income and assets properly.
How long does the NY mortgage process take?
The process can take anywhere from 30 to 50 days from application to closing. This depends on the program you choose, how quickly you can get access to your documents, and also how your contract reads. Having all of your documentation up front and ordering the appraisal and title early can help speed up the process.
Which home loan program is best for me?
This is a question that can only be answered once your Mortgage Loan Originator (MLO) has reviewed your complete profile. The MLO will ask you certain questions that should help determine which program works best for you. These questions might include:
- Are you a Veteran?
- Are you buying your home in a USDA Eligible Area?
- How much do you have for a down payment?
There are a variety of loan programs available, including VA Loans, USDA Loans, and FHA Loans, as well as conventional loans, bad credit loans and more. Answering the questions asked by your MLO will help you to determine which of these loan programs is right for you.
What will my home loan interest rate be?
In order to be quoted a legitimate interest rate, a Mortgage Loan Originator has to take your full profile into consideration. This involves reviewing what type of loan program you are trying to qualify for, how many years (term) you are looking to finance and what your credit score, loan size, and down-payment are. Once these items have been carefully reviewed, a Mortgage Loan Originator will present options to you in order to determine which suits you best.
Keep in mind that sometimes a lower interest rate can lead to a higher monthly payment (if the mortgage insurance is much higher based on the program you choose). When looking at the final numbers, make sure you take into consideration not only interest rate, but overall monthly payment and closing costs. It is possible to obtain a lower interest rate and have a major increase in your closing costs. It is very important to speak with a Licensed Mortgage Loan Originator to make sure the extra closing costs outweigh your monthly savings.
If you happen to be looking in the newspaper for daily interest rates, or finding rates on-line from pop-up ads, you should question the validity of those rates. A reliable quote on interest rates can only be provided after reviewing your overall financial profile (including your credit score), reviewing your goals and establishing what mortgage program best fits you. As a result, when it comes to determining your interest rate, it is very important to speak with a Licensed Mortgage Loan Originator.
Looking for more answers to questions about purchasing a home?
We offer a number of helpful resources for first time homebuyers. Check out the following for more helpful information about purchasing your first home:
Top 7 Home Buying Tips – Helpful advice to make the home buying process easier and less stressful for first time homebuyers.
Common First Time Homebuyer Mistakes (& How To Avoid Them) – Insight about key mistakes many first time homebuyers make and how to avoid them when buying your first home.
6 Step Guide to the Mortgage Process – A guide that simplifies the numerous steps involved in obtaining a home loan so you can understand each phase of the process.
Mortgage Blog – Our frequently-updated blog featuring content about all aspects of home buying, from saving for a home and finding the right house to securing the best mortgage for you and closing the deal.
Who’s Involved in the Home Buying Process? – A list of all the people you will work with throughout the process of buying a home and securing a mortgage to help you understand the ‘who’s who’ of home buying.
Ready to take the next step?
If you’re ready to purchase a home and you’re looking for first time home buyer programs in Albany, Saratoga, Queensbury, and elsewhere throughout Upstate NY, Maple Tree Funding can help! As a local mortgage broker with offices in Glens Falls and Latham, we provide competitive loan programs for first time homebuyers in NY. We offer low rates, a high level of customer service and can guide you through every step of the home buying process.
Ready to get started? Have questions about which first time home buyer mortgage options might be right for you? Our experienced mortgage loan originators would be happy to assist you. Give us a call at 518-782-1202 or contact us online to learn more!