OnPath Credit Union

A Primer on Home Loans for First-Time Buyers

Buying a home for the first time can be daunting. There are many factors to consider about your purchase. You have to think about the property’s size, location, and most importantly, cost. While buying a home can leave a huge dent in your bank account, various options can help you lessen the blow. You can take advantage of various home loans for first-time buyers.

Benefits of First-Time Buyer Loans

Most of the time, first-time homebuyers are still in the process of establishing their financial security. As such, taking advantage of borrower-friendly loans, such as first-time buyer loans, is a crucial step they must take to ensure that they can get started on the right foot.

First-time homebuyer loans are easier to qualify for as opposed to most conventional loans. They also allow qualified borrowers to pay minimal to no down payment. Depending on the financial institution you’re doing business with, there’s a chance that you won’t be required to get private mortgage insurance.

What to Expect?

Lenders will evaluate whether you qualify for a loan or not based on your credit history, income, assets, and debts. They will also check your FICO score (a credit score used to quantify and evaluate your creditworthiness), calculate your loan-to-value ratio, and compute your debt-coverage service ratio. Afterward, they will determine the maximum amount they are willing to lend and the interest rate they will offer.

Loan-to-Value Ratio

Your loan-to-value ratio (LTV) is calculated by dividing the amount you’re borrowing by the price of the home you’re purchasing. If your LTV is high, lenders will most likely offer you higher interest rates. You can lower this ratio by making a bigger down payment.

Debt-Coverage Service Ratio

A financial institution will calculate your debt-service coverage ratio (DSCR), which indicates your ability to pay for the mortgage. This ratio is determined by dividing your monthly net income by the costs of your home loan.

Get in Touch With Us

At OnPath Federal Credit Union, we understand that buying a home for the first time can be confusing and overwhelming. Let our loan officers guide you every step of the process–from application to approval of your home loan. We will provide you with the stellar customer service you deserve. Apply online today!