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The Home Buyers Guide to

Buying Your First Home

Thinking About Buying Your First Home?

Your go-to resource for first-time home buying

Buying a home for the first time may seem complicated and stressful, but it doesn’t have to be.

We'll give you everything you need to know about buying your first home so you know what to expect every step of the way.

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Mortgage 101

Since there is so much to think about when buying your first home, it’s crucial that the process is as easy as possible without being completely automated and impersonal. We want to help you avoid common pitfalls that many first-time home buyers experience.

What is a Mortgage?

A mortgage is a way to buy a home without paying 100% cash up front. In fact, 86% of recent home buyers financed their home purchase last year.*

What's Included In Your Monthly Mortgage Payment?

Principal: This is the total amount of money you’re borrowing. If your loan is for $200,000 then your principal is $200,000. As mortgage payments are made, the principal is reduced.

Interest: This is the amount you pay your lender for borrowing money. The interest rate on your loan is dependent on what’s going on in the market at the time your loan is secured (as well as your credit score, down payment, etc.)

Mortgage Insurance: If you put less than 20% down on a conventional loan, you will pay Private Mortgage Insurance (PMI). If you get an FHA loan, you’ll pay Mortgage Insurance Premiums (MIP) which is calculated yearly and paid monthly.

Taxes: This is based on your property value. Each year your property will be assessed for tax purposes and a payment is due.

With so much of your hard-earned money on the line, it’s best to seek advice from a trusted home loan expert and have the confidence that you are in qualified hands.

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Download Your
Home Buyer Starter Kit Today!

Whether you're looking to buy a home right now or home buying is part of your future, use this kit to make sure the process is as simple as possible.

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By submitting this form, I/we agree to your Privacy Policy Terms of Use and authorize Churchill Mortgage Corporation and/or their Preferred Provider for our area and/or The Churchill Agency to receive the above information to assist in obtaining a home loan.

I/we also authorize Churchill Mortgage Corporation, The Churchill Agency and/or their Preferred Provider for our area to contact us regarding but not limited to mortgage and insurance services and products via telephone, mobile phone (including through automated dialing), and/or email, even if telephone numbers or email I/we provide are on any Do Not Call/Contact Registry, such as corporate, state, or the National Do Not Call Registry. The submission of this form does not constitute in any way a formal loan application or a commitment for a loan. By communicating with us by phone, you consent to calls being recorded and monitored. By participating, you consent to receive text messages sent by an automatic telephone dialing system. Consent to these terms is not a condition of purchase.

 

How It Works

The most important part of understanding the mortgage process is finding a lender who understands you and your home loan goals (like saving time and money). Some parts of the process can be taken care of now while other parts will occur after you’ve picked out your home. Here’s a quick and easy view of the home loan process:

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Complete Your Application

First, you submit your mortgage application. This lays the groundwork for your Home Loan Specialist to be able to give you accurate interest rate quotes and down payment options.

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Become a Certified Home Buyer

By becoming certified with Churchill, you will get a pre-approval with upfront underwriting. This means you’ll know exactly how much you can afford without any surprises down the road. You’ll get into your new home quicker and with less stress.

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Time for Processing

After your application is completed, you’ll start getting your home inspection and appraisal under wraps. This is when you’ll be asked for any additional documentation to close your loan, if you haven’t already provided it.

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Underwriting Takes Over

Your home loan will go through underwriting (remember, it has already been through underwriting at the beginning of your loan process if you became a Certified Home Buyer). This just verifies all conditions on your home loan are approved and then you’ll be issued a “clear to close.”

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Closing on Your New Home

The underwriter will issue your final approval, process your closing paperwork and schedule your closing date and time. On your official closing day, you’ll have a lot of documents to sign but in the end your loan will be funded, and you’ll get the keys to your new home.

 

What Can I Afford?

When buying your first home, you’ll likely have a lot of questions.

One of the most common questions we get asked is “What should I do first?” The first thing you should do is find out how much house you can afford. We provide an easy-to-use calculator using your monthly income with your projected loan term. Once you know your estimated home affordability, you can start building your personalized home buying team.

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Loan Options

Conventional Loans

This is the most common loan option and meets the needs of most people. Due to lack of government backing, they do require better credit to qualify. The overall cost is typically lower than most comparable government-backed loans.

Pros:

Principal and interest payments won’t change for the life of loan, you can pay off your mortgage at any time without penalties, you can typically avoid Private Mortgage Insurance (PMI) with a 20% or higher down payment, and primary homes can be purchased with 3% down.

Cons:

You’ll need a credit score of at least 620 and a debt-to-income ratio no higher than 50% (and lower so you can get better loan terms).


FHA Loans

If you don’t qualify for a conventional loan, take a deeper look at this option. These loans are backed by the government and have a lower down payment requirement, credit score threshold, and income qualification. It might fit what you need!

Pros:

Easier to qualify, primary homes can be purchased with 3.5% down, fixed rates are available, and down payment assistance programming is available. You also only need a small amount of cash to close on your home.

Cons:

You will pay a Mortgage Insurance Premium (MIP) for a minimum of 11 years or it can be paid for the life of the loan, depending on your situation.


VA Loans

If you or your spouse has served in the U.S. military you’ll want to look at this option because it’s a great loan product that’s an earned benefit offered to all active duty and retired military personnel.

Pros:

This benefit never expires. Financing is available up to 100% of a home’s value and there is no maximum loan amount. There’s typically lower closing costs with this loan type due to the VA limiting fees and closing costs. If you decide to pay off your mortgage early, you won’t have any extra fees associated with this.

Cons:

The VA loan program is a benefit that you must earn (i.e. eligible service members who have served in the U.S. military, and spouses of veterans who have died in the line of duty, etc.) You have to buy a primary residence (not an investment property or a second home). There is also a funding fee that is required by the U.S. Department of Veterans Affairs for most VA loans.


USDA Loans

This loan is designed for rural home buyers, making it ideal for those who may not be able to get conventional financing. It’s managed by the Rural Housing Service and offers flexible credit criteria.

Pros:

Easier to qualify, primary homes can be purchased with 3.5% down, fixed rates are available, and down payment assistance programming is available. You also only need a small amount of cash to close on your home.

Cons:

Not all houses are eligible for this loan type and it can only be used for a primary residence. You are required to pay a fee for a USDA guaranteed loan (which is typically lower than those on traditional mortgages but can still be several thousand dollars).


Jumbo Loans

Jumbo loans (also known as non-conforming loans) are privately-backed mortgages that usually require a larger down payment, higher credit scores, and higher income levels from home buyers.

Pros:

Jumbo loans offer a unique opportunity for home buyers to purchase a home that exceeds the conforming loan limit (which is adjusted yearly).

Cons:

There are stricter lending requirements for jumbo loans. To get approved, you typically need to have a solid financial history, at least 5-10% down, and a good credit score. Jumbo loan interest rates are typically higher than conventional rates.


No Score Loans

If you have been working hard to pay off your debt and no longer have a credit score as a result of this, a no score loan might be a good option for you. You will go through a manual underwriting process to get this non-traditional mortgage.

Pros:

It’s a myth that you can’t get a mortgage without a credit score. Not everyone can pay cash for a home, so this is a great option if you are debt-free and do not have a credit score. There are a variety of no score loan types available, just ask a Churchill Home Loan Specialist what’s best for you!

Cons:

The manual underwriting process can take a little longer than traditional underwriting. You must have record of a housing payment for at least 12 months. This type of loan is not for those with low credit score, it’s for those who are “credit invisible” and have a zero credit score due to a debt-free lifestyle.


Connect with an Expert!

With so much of your hard-earned money on the line, it’s best to seek advice from a trusted home loan expert and have the confidence that you are in qualified hands.

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social proof

By submitting this form, I/we agree to your Privacy Policy Terms of Use and authorize Churchill Mortgage Corporation and/or their Preferred Provider for our area and/or The Churchill Agency to receive the above information to assist in obtaining a home loan.

I/we also authorize Churchill Mortgage Corporation, The Churchill Agency and/or their Preferred Provider for our area to contact us regarding but not limited to mortgage and insurance services and products via telephone, mobile phone (including through automated dialing), and/or email, even if telephone numbers or email I/we provide are on any Do Not Call/Contact Registry, such as corporate, state, or the National Do Not Call Registry. The submission of this form does not constitute in any way a formal loan application or a commitment for a loan. By communicating with us by phone, you consent to calls being recorded and monitored. By participating, you consent to receive text messages sent by an automatic telephone dialing system. Consent to these terms is not a condition of purchase.

 

The Cost of Renting

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Some housing markets are more “buyer friendly” than others but with rent continuing to go up month-over-month in 81 of 100 largest U.S. cities, it’s fair to say that rent is getting out of control nationwide. Renting could be cheaper in the short-term but buying a home helps you build long-term wealth.

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FAQs

Looking for answers to your questions about mortgages? We’ve got you covered. Learn more about pre-approvals, interest rates, loan terms, and more.


A: A down payment is the cash you pay upfront to get a mortgage. It’s deducted from the total amount of your home loan. To figure out how much of a down payment you need, start with the type of loan you are trying to get. For example, you can get a conventional loan with as little as 3% down, an FHA loan with 3.5% down, and a VA or USDA with no money down. The more money you put down for a down payment, the less your monthly mortgage payment will be. We recommend you speak to a Churchill Mortgage Home Loan Specialist to help you with your unique situation.

A: Closing costs are the charges you are required to pay before your mortgage is completed and fully funded. Typically, home buyers will pay anywhere between 2% and 5% of the loan amount in closing fees. For example, if your home costs $250,000, you could pay anywhere between $5,000 and $12,500 in closing costs. You will receive your closing costs from your Home Loan Specialist in a Loan Estimate that you will receive after you apply for your home loan and in the Closing Disclosure document that is provided before your official closing day.

A: It is possible to get a conventional mortgage with a credit score as low as 620 and an FHA loan with a credit score of at least 580. However, be aware that the lower your score, the higher your interest rate will be. Churchill Mortgage also offers zero credit score loans which means if you have paid off all your debt and have a credit score of zero, we can still provide a home loan to you and provide you with guidance on how to pay off your home as soon as possible. Click here to find out more information about no score loans and how we can help.

A: The majority of home loans today are fixed rate. Only about 3% of home buyers are choosing to go with an adjustable-rate mortgage (ARM). An adjustable-rate mortgage can be risky because your interest rate will fluctuate over time which means your monthly payment will also go up and down. Many ARMS will start at a lower interest rate compared to a fixed-rate mortgage, but will then go up to a much higher interest rate. Talk with a Churchill Home Loan Specialist about which home loan is best for you.

A: When you cap your interest rate it means you are guaranteed today’s mortgage interest rate for up to 90 days through the Churchill Rate Secured program. You’ll be able to protect yourself from fluctuating interest rates by locking or capping your rate. So, if you’re thinking about buying a home in the next three months it’s best to secure a low interest rate to save you money. If you don’t find a home in that initial 90-day period, you can reset your rate for another three months. Click here for more information.

A: Mortgage points are also known as discount points. They are basically prepaid interest on your home loan. In other words, points let you make a trade off between what you pay upfront at closing versus what you pay monthly later. It’s not always beneficial to “buy down” your interest rate. In fact, you could lose money. Each point is equivalent to 1% of your total loan amount. For example, on a $200,000 mortgage, one point would cost you $2,000 directly out of your pocket. This money is in addition to your down payment and adds to your total closing costs. A one-point discount does not necessarily equal a 1% lower interest rate. Click here for more information about seeing if points are worth the cost or speak to a Home Loan Specialist today.

A: This depends. A 15-year loan term usually comes with a better interest rate compared to a 30-year loan term. You will pay off your home quicker with a 15-year mortgage and will save a large amount of interest. On the other hand, a 30-year term will cost less per month.

A: You will be asked to provide many different documents including but not limited to: Income verification (such as the last two years’ tax returns, W-2s, 1099s, pay stubs, etc.), driver’s license and social security card, bank statements, proof of funds to close, etc.

A: Any loan officer or lender can say you are “pre-qualified.” A pre-qualification is based on information you provide. It is not a verification of your income and assets. While this may seem like the quickest and easiest option, you’re not actually approved for financing. This can be a big problem if you’ve invested weeks or even months of your time and effort looking for the right home and it’s sold from underneath you while you’re trying to get your loan approved.

A: A standard pre-approval takes a little more time than a pre-qualification since you’ll need to submit financial documents to your lender for review. A standard pre-approval can help you determine how much you can afford before you start looking for a house doesn’t mean a mortgage underwriter has reviewed your file, resulting in a less reliable approval.

A: This is the best option if you’re looking to buy a home, especially when the competition is high. When you become a Certified Home Buyer, you are submitting your financial documents to be reviewed by an actual underwriter. You can be conditionally approved for financing on a new home without a property address. You’ll do a bulk of the leg work up front which makes the home buying process quick and seamless once you’ve found your dream home. This will give both you and the seller of the home peace of mind that your funds will be approved when it’s time to sign on the dotted line.

A: Many mortgage lenders hold money that you’ve paid in an escrow account to pay your property taxes, homeowner’s insurance, and in some instances even your homeowner’s association (HOA) fees. This makes it as easy as possible so you only have to make one mortgage payment a month and you don’t have to think about ongoing annual payments for your insurance and property taxes. Your lender will calculate how much your property taxes and homeowner’s insurance premiums are for the entire year, and then divides them by 12 (one payment per month). You’ll then pay that amount each month along with your standard mortgage payment, and in return, your lender will manage the escrow account and submit payments for your property taxes and homeowner’s insurance when they are due. In some states such as Hawaii and California, escrow is referred to as impounds. Click here to learn more.