How do home loans work? If you’re a first-time home buyer, you’ll want to check out this guide to learn more about how to handle your home loan.

Last year saw the most first-time home buyers since 2005. 985,000 first timers jumped in the homeowner’s market in 2018. 

Are you thinking about purchasing your first home? Besides finding the perfect neighborhood, you need to think about the mortgage. Do you have questions about a first-time home buyer loan? 

How do home loans work? If you’re a first-time home buyer, you’ll want to check out this guide to learn more about a first-time homeowners loan. 

How Do Home Loans Work?

Home loans are designed to give you the money you need to finance the purchase of a home with a promise to repay the mortgage plus interest. Failure to pay your mortgage can result in the forfeiture of your home because the home is the collateral for the loan. 


If you are just starting out and are wondering, “How much can I borrow?”, you’ll want to get prequalified. 

A lender will look at your credit score, income and debt to determine how much money you can afford to spend on a home. 

Sellers like to see prequalified buyers because they know you have the ability to secure a home loan. 

Getting a Mortgage 

Once you have found a home, all of the work for your home loan begins. The lender will guide you through all of the steps involved:

• appraisal

• title search 

• title insurance

• closing

5 Things Every First-Time Buyer Should Know

As a first-time home buyer, you’ll have a couple of different options available to you. There are also things that you need to keep in mind as you make one of the largest purchases of your life. 

1. FTHB Loan

There is such a thing as a First-Time Home Buyer Loan. How does a first-time home buyer loan work? These loans are designed to help qualified buyers become homeowners with some financial assistance. These programs are usually limited to certain geographical areas and have different rules for varying locations. 

Assistance comes in the form of help with the down payment, a lower interest rate, help with fees, grants or deferred payments. 

2. Only Buy What You Can Afford

Even if you prequalify for a certain amount of money, it doesn’t necessarily mean you can afford the monthly mortgage payment. Keep in mind how much you spend each month on things that the lender would not know. 

3. You Don’t Need a 20% Down Payment

A 20% down payment used to be the standard and it is what you need to eliminate Private Mortgage Insurance (PMI), but it is not a must. The average down payment is 13%.

4. Location, Location, Location

Do not fixate on the perfect house over the location. You can always renovate and change things, but if you’re not happy with the location, your only choice is to move again. 

5. Do Not Jeopardize Your Credit

You found the perfect home, the mortgage is in the works and you want to purchase a car. Don’t do it! The lender will pull your credit score again right before closing. You do not want to raise any red flags. Keep spending in check as your loan is being processed. 

Buying a Home

Now that you learned the answer to the question, “How do home loans work?”, you are ready to explore the idea of buying a home. Visit us for information and advice on anything real estate.