Last Updated on September 18, 2024 by Luke Feldbrugge
Congratulations on starting your home search! One of the biggest challenges is knowing where to start. Luckily, you’re in the right place. Homes for Heroes breaks down what you need to know as a first time home buyer and a law enforcement hero. Follow these steps to buy the perfect first home.
#1 – Financing
Deciding to buy your first home is exciting. Once you’ve made up your mind, you want to start looking at houses. But, there are actually several steps you should take before stepping foot in a potential home. Buying a home is likely the most expensive purchase you’ll ever make. You know there will be a cost for the home, but there are also lots of other costs to become a homeowner. There are down payments, closing costs, moving costs, property taxes, homeowners insurance, and several other costs that a first time home buyer might not know about. We will address some of these costs below. For now, the first step in the process when determining how much home you can afford as a first time home buyer and law enforcement professional is to look at your finances.
Your mortgage lender will ask for a couple of things to determine your ability to pay back your mortgage. Since mortgage lenders are the ones who provide most types of loans, it is usually up to them to determine if you’re going to pay the loan back or not. Each lender has criteria that they look at to see a comprehensive financial picture. They use this to then determine if you’re approved for a loan, and what the terms are.
Before you meet with a lender, however, you can get a pretty good idea of the amount of loan you can afford to pay back. There are several online mortgage calculators where you can enter your information to get a close estimate. You can also start to gather the documents that your lender will ask for to speed up the process. These include W2’s, tax returns, credit card and loan statements, and paystubs. Also, you can start to work on things like building your credit score if needed.
Credit Score
One of the main factors a mortgage lender will look at is your credit history and credit score. They will pull a credit report to see how you have paid current and past debts, like car loans, student loans, and credit card bills. If you have been late consistently on these payments, that could hurt your credit score. Generally, one missed payment shouldn’t hurt your credit more than a few points, so don’t sweat it too much if you’ve missed a payment recently.
It can be a good idea to check your credit score before you meet with your lender to avoid surprises, but it’s not required. You can check each of the three credit bureaus once a year for free without it hurting your credit. Knowing what your credit score is as a first time home buyer will help you understand your overall finances. Your credit score also has an impact on what your interest rate will be. The better your credit, the lower your interest rate.
One big myth about buying a home, especially for the first time, is that you need to have Excellent credit. This simply isn’t true. There are all kinds of mortgage types for all kinds of financial and credit situations. If your credit score has been holding you back on your dream to own a home, just meet with a lender. They can let you know what options you have as a professional in law enforcement and first time home buyer. If you need to work on your credit, they can give you suggestions on how to improve it.
Financial Documents
Your lender will also need to see things like your bank statements for the last few months and your last two or more years of W2’s. They may even verify your employment with your employer. This is all to make sure that you can actually afford to make the payments once you receive your loan. Most lenders also look at something called DTI, which is debt-to-income ratio, to determine if you can afford your loan. Mortgage lenders look for a lower DTI when approving loan applications, typically under 36%. You can calculate your DTI with this calculator.
#2 – Secure a Lender
While you may think you need to start your home buying process with a real estate agent, that’s only partly true. You will need a real estate agent to help you with the home buying process. But, you should also be looking for a lender before you start to look at home. Most real estate agents have a relationship with a lender that they suggest you use, but you are also allowed to find your own. The reason finding a lender is important at the beginning of the process is to get pre-approval.
Getting pre-approved before you start looking for a home is smart for several reasons. For one, it tells you exactly how much money the lender is willing to loan you. This is important to know, in case your desired price range is higher than the amount you’re approved for. Knowing your max loan amount can also help you calculate how much money you have to put for a down payment once you find a house you’d like to put an offer on. It also shows homeowners that a lender has already gone through your finances, has agreed to give you a loan, and the likelihood that your offer would fall through on your end is small. This can give them more confidence in picking your offer if there are multiple offers on their home.
Your lender will ask for most, if not all, of the items above to start your loan application. They will also discuss with you things like interest rates and different types of loans.
Interest Rate
You can’t talk about mortgages without talking about interest rates. But what is an interest rate? An interest rate is the price you pay a bank to borrow money. It is calculated as a percentage of the total amount borrowed. The better your credit score, generally the lower the interest rate.
Interest rates fluctuate daily, and are influenced by the Federal Reserve on a national level. Since the 2020 pandemic, interest rates have been at or near historically low numbers in hopes to stimulate the economy and get people to spend money. This means, over the life of your loan, you could end up paying thousands of dollars less, which makes now an attractive time to be a first time home buyer if you’re a law enforcement professional. Interest rates can also vary by the type of loan you receive.
Fixed vs. Adjustable
There are also two different types of interest rates on mortgages, fixed rate and variable rate. Fixed rate means that the interest rate stays the same for the life of the loan. A variable rate, or adjustable rate mortgage (ARM), has an interest rate that is fixed in the beginning for a portion of the loan. After that beginning period is over, anywhere from 3-10 years generally, the interest rate can change monthly. It will go up and down based on the market rate.
ARM’s make it harder to budget for your mortgage payment, since your rate will be whatever the current market rate is. Your mortgage one month could be $900 with that month’s interest rate, and the next it could be $1,300. Your loan specialist will be able to discuss the advantages and disadvantages of both types of rates with you.
One positive thing about adjustable rates is that if you plan to move in the near future, you can potentially get a lower interest rate than with a fixed rate mortgage. And if you sell your home or refinance before the adjustable rate period starts, you do not need to worry about the fluctuation.
Pre-Approval
Once you provide your lender with all you information, and they approve your request, you are officially pre-approved. This means that they will tell you the amount of money they are willing to loan you as a first time home buyer, what interest rate they will loan it to you at, and how much that breaks your monthly mortgage payment into. Getting pre-approved can get you ahead in your home search, as sellers will see that you have approval. This tells them the chances of your offer falling through are small.
Lenders do not exclusively look at one financial factor, and every lender has their own standards. Even if you have higher DTI, or lower credit, it’s still a good idea to talk to a loan specialist. Your lender will have a surprising amount of options for you!
At Homes for Heroes, we understand that being a first time home buyer and working in law enforcement can have some challenges with shift work and overtime when it comes to loans. We also understand that a lot of law enforcement professionals don’t work a typical 9-to-5 shift. Our lenders are happy to work around any challenges you may encounter and work to get the loan you need. Sign up now to get more information from one of our mortgage specialists today.
#3 – Know Your Options
Loan Types
Your lender will look at all your finances and determine which types of loan you qualify for. Then, they can discuss with you which could be the best option for your situation. For first time home buying law enforcement professionals, FHA loans can be a great option because of their lower credit requirements. They can also be a great option if you have less cash on hand, since first time home buyer down payments are hard to save for, and this allows you to save less for a down payment. Down payments with FHA loans can be as low as 3.5%.
You could also qualify for a USDA loan if you are looking to purchase a home in a rural area. As a law enforcement agent, you are in demand everywhere, not just in major cities. If you’re moving to a rural area, USDA loans could fit you perfectly.
VA loans are also an option if you or your spouse is a military veteran. We know a lot of law enforcement started their careers in the military, and therefore typically qualify for VA loans. These loans have zero down payment requirements and usually lower interest rates. Most individuals, however, qualify for a conventional loan, which make up the majority of home loans for law enforcement and the general population.
Home Buying Programs and Grants
There are also several down payment assistance programs or other home ownership assistance for law enforcement. The U.S. Department of Housing and Urban Development, or HUD, has an excellent law enforcement mortgage program called Good Neighbor Next Door. This program allows most law enforcement professionals who are also first time home buyers to pay 50% of the list price of a home. There are some restrictions with this housing program, like the home needs to be in a certain area, and you have to live there as your primary residence for 36 months. But, for a home that’s half off, those are pretty good terms!
There is also the Down Payment Resource you can utilize to find down payment assistance and home buying grants specifically for those in law enforcement. This is the largest online database of available home loan programs, down payment assistance, home buying grants and more. You just put in a few pieces of information like location, income, home price range, and that you’re employed in law enforcement. The database then shows you all the home buying programs that you’re eligible for.
#4 – Find a Real Estate Agent
While you are working on your pre-approval with your lender, you can also find a real estate agent. Real estate agents are necessary for buying a home, and will be your best advocate with the sellers. They also understand what a typical home in your budget looks like, knows what your budget can get you in your community, and they keep their eye on things you might not know to think about or look at.
Knowing where to start to find an agent can be tough, as you want someone who will work with you and for you to get you the best deal on the best home. You can search the internet, ask friends and family, and read reviews. Or, you can let Homes for Heroes match you with a real estate specialist in your community that has experience working with law enforcement officials.
Homes for Heroes
At Homes for Heroes, we can connect you to both lending specialists and real estate agents. We have the largest nationwide network of both lenders and real estate specialists of any similar program in the country. As a law enforcement agent looking to buy their first home, you qualify as a hero deserving of our thanks. Sign up with Homes for Heroes and you’ll be matched with these specialists with no extra work or cost to you. As a law enforcement hero, Homes for Heroes and our affiliates want to say thank you. To do that, we offer you Hero Rewards.
When you buy a home with one of our real estate specialists, you will receive a check for 0.7% of the purchase price, or $700 for every $100,000. You’ll receive these Hero Rewards after you close on your new home. Plus, if you work with our mortgage, title and inspection specialists, you can save $500 on lender fees, $150 on title services, and $50 on a home inspection. That adds up to thousands of dollars in savings! On average, our heroes save $3,000 when buying a home. Sign up for Homes for Heroes with no obligation to talk to a real estate agent or mortgage specialist in your local community and get more information.
You are able to combine Hero Rewards with any other type of home buying program, assistance, or type of loan that you receive. You and your agent will be able to talk about all the specifics.
#5 – Write it Down
This step can be helpful when buying your first home. There are so many things to think about when deciding what meets your needs in your first home. Sure, there are things to consider like the amount of bedrooms or number of stalls in the garage. But there are a lot of things first time home buyers overlook. For example, what kind of amenities or attractions are nearby? Schools, parks, shopping, and restaurants are all things to consider. For some, those are important, for others, not so much. Proximity to work could be a large factor as well, so you can spend less time commuting. Now that you’ve found an agent, they’ll have questions like this to get you thinking more specifically.
Something else to consider is the age of the home. Is it a brand new home, or recently fully remodeled, that requires no work once you move in? Or is it a fixer-upper that will need immediate attention before you can move it? If you do not have the time or resources to fix up a home, you’ll want to put that on your list too.
Ugly or Unlivable?
For most people, things like paint color or landscaping can make a home less appealing. But, if the functionality or location of the home are perfect, those cosmetic issues can be easy things to fix yourself. You can also change the appearance of the house, but you can’t change things like function or proximity. For example, you can change the paint color in the bathroom if you don’t like it. But, if the house is too small or too far away from your child’s school, you can’t make the house bigger or closer.
Have you put thought into the type of house you’re looking for? A single-family home isn’t always the right fit for everyone. As a busy law enforcement officer, you might not have time for yard maintenance. That could make you an ideal candidate for a townhouse or a condominium, where yardwork is usually taken care of by an association. Or maybe you have plans to become a landlord down the road, making a duplex a good option for you. Make sure to share with your real estate agent the type of dwelling you’re looking to buy as well.
Adding all of these things that are important to you, both tangible and intangible, to a list is a great way to help your real estate agent find exactly what you’re looking for. Knowing what they can skip and what is necessary will help narrow down their search for you. This will also save you time in your busy schedule from looking at homes that wouldn’t work to start with.
#6 – Start Looking
Now that you have a good idea of what you are looking for and have communicated your list with your real estate agent, it’s time to start looking at homes! This can sometimes be a long and tiring process, but exciting as well. Plus, your real estate agent will be there every step of the way to answer questions that you may have and guide your search.
Don’t be discouraged if it seems like you look at dozens of homes. Sometimes, seeing a home in person can actually help you see what kind of things you don’t want. Maybe you always dreamed of having a walk-in closet. But, when you see how much space it takes away from your bedroom, you might change your mind. The more you look at homes and give feedback to your agent, the more your agent can narrow their search to find the perfect home.
Once you find a home that you just have to have, it is time to submit an offer!
#7 – Submitting an Offer
Making an offer on your first home can be an exciting process! But, it can also be scary and stressful. To draft your offer, your real estate agent will discuss with you how much you would like to offer. While your agent is there to offer guidance, the actual amount you offer is entirely up to you. Your agent will also ask if there are any stipulations or requirements you want to add to your offer. For example, if there is a swing set that your kids would love, you can request it stays with the property in the agreement.
They will also ask you for the terms of closing, or how long you will need to close. If you’re renting, it can be a good idea to time the closing with when your lease is over. Or, if you know the seller needs to move for a job and you are flexible, you could speed up the closing. Once you have all the pieces of your proposal, your agent will submit your offer to the sellers. If they accept your offer, congratulations! You are one step closer to becoming a home owner.
Sometimes, sellers will come back with a counter offer, whether that is a different price, disagreeing to your stipulations or closing time, or some other counter offer. This is where your real estate agent will work to get you the best deal they can. Or, if you are not willing to agree to the seller’s requests, you can walk away from the home. Then you’ll need to start the home search over again.
#8 – Offer Accepted
Once the seller accepts your offer, it doesn’t mean you own the home – yet. There are several things that need to happen before your closing date to ensure a smooth transition of ownership. It’s always wise to conduct an inspection on your soon to be home. This common practice brings in an inspector to look at your home and make sure it is in working order. Items they look at are things like the foundation, electric, plumbing, HVAC, and other items. Inspections are also required if you are using a USDA loan.
If they find something wrong, like a crack in the foundation, electricity not to code, or any other issues, it’s not the end of the world! As the buyer, you have a few options. You and your real estate agent can come back with a counter offer. In that counter offer, you can ask for a few different things, like: a lower sale price since you’ll need to pay for the repairs, you can ask the homeowner make the repairs, you can extend the closing period so that the repairs can be done before moving in, or, if the fix is going to be too expensive or complicated, you can cancel the sale. You can also use your Hero Rewards to fix anything that shows up on your inspection too!
Another thing that will need to happen before you close is a home appraisal. These are a requirement for some types of home loans and from different banks. A home appraisal tells the bank that a home is worth a certain amount of money. If you are asking for a home loan for more than that amount, typically they will only give you what the home appraises for. On the other hand, if a home appraises for more than the purchase price, you will either need to renegotiate the sale price with the sellers, or come up with the difference in cash in order to close on the home. For example, if you offer $250,000 on a home, and it appraises for $260,000, you’ll need to come up with the difference of $10,000.
#9 – Closing and Moving Day
Once you make it to your closing date, the home is almost yours! Your real estate agent and your lender will be in communication with you during the period before your closing date. They’ll let you know what you’ll need to bring to closing, along with what your final closing costs will be. Again, each lender will have their own requirements, but typically closings will need at least proof of homeowners insurance and a cashiers check for your down payment amount and closing costs, among many other items.
Generally, you’ll also do a final walkthrough a day or less before closing. This ensures that the home is clear of the previous owner’s possessions, and that there are no other breaches of contract. Once you sign all the paperwork (there will be a lot!), the house is officially yours. You are now the owner of your very first home and can move in.
Buying your first home as a law enforcement professional is exciting, and Homes for Heroes wants to help. Our mission is to serve every hero, including law enforcement, healthcare workers, teachers, firefighters, EMS, and military. Even if you’re just starting to think about homeownership, let Homes for Heroes get you into the home you deserve.
