Last Updated on September 18, 2024 by Luke Feldbrugge
One of the biggest challenges of buying your first home is knowing where to start and what to do next. Purchasing a home is a major, and expensive, decision, and you need to know what you’re up against before you begin. Being a healthcare worker also doesn’t lend a lot of time to research all you need to know. Luckily, Homes for Heroes breaks down our first time home buyer program for healthcare workers like you. Let’s walk through and unpack the common questions and steps of first time home buyers.
Step 1: Financing
It’s no secret that owning a home is expensive. There are down payments, closing costs, moving costs, and several other fees and payments that a first time home buyer might not know about. We will address some of the other costs below, but the first step to take in your home affordability process is to look at your finances. Your mortgage lender will ask for a couple of things from you to determine your ability and willingness to pay any loan back that you receive. Since lenders provide most of the types of loans to you, it is usually up to them to determine if you’re going to pay the loan back or not.
You can have a good guess at what you will be approved for before meeting with your lender, however. There are several online mortgage calculators you can plug some of your information into for a close guess. You can also start to compile the documents that your lender will ask for to speed up the process. 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 to see how you have paid other current and past debts. Things like credit card bills, student loans, and car loans will be looked at. If you have been late consistently on payments like this, that could hurt your credit score. If you want to see what your credit score is before meeting with your lender, 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 will help you understand your overall finances.
Financial Documents
Your lender will also need to see things like your bank statements for the last two months, your last two years of W2’s, and 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%. To calculate your DTI, add the total number of recurring debts you have (potential mortgage amount, any other loans like car loans or student loans, credit card payments). For example, if you had an estimated mortgage of $1400, plus a $200 car loan and $300 in credit card payments a month, your debts would equal $1900. Next, take your $1900 in debts and divide that by your gross monthly income (income before taxes are taken out). Let’s say that’s $6000. That number multiplied by 100 is your DTI percentage. In this example, your DTI would be 31.6%.
Step 2: Secure a Loan Specialist
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. They will also be able to get you pre-approval for your loan if you qualify.
Interest Rates
You can’t talk about mortgages without talking about interest rates. But what is an interest rate? An interest rate is the cost you pay to borrow money. It is a percentage of the total amount borrowed. The better your credit score, generally the lower the interest rate.
The interest rate fluctuates daily, and is also influenced by the Federal Reserve on a national level. Since the 2020 pandemic, interest rates have been at or near historically low numbers. This means, over the life of your loan, you could end up paying thousands of dollars less, which makes now an attractive time to buy. Interest rates can also vary by the type of loan you receive.
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. Sometimes it can go up, and sometimes it can go down. This type of mortgage makes it harder to budget for your mortgage payment, since your rate will be whatever the current market rate is. ARM’s can be difficult for first time home buyers especially. Your loan specialist will be able to discuss the advantages and disadvantages of both types of rates with you.
Loan Types
Your lender will be able to then look at all your finances and determine which type of loan you qualify for, and which will be the best option for you. If you have lower credit, they might recommend a FHA Loan. For first time home buyers in the healthcare field, FHA loans can be a great option. They can also be ideal for those who have smaller down payments, which often include first time home buyers.
You could also qualify for a USDA loan if you are looking to purchase a home in a rural area. As a healthcare worker, you are in demand everywhere, not just in major cities. VA loans are also an option if you or your spouse is a military veteran. Several healthcare professionals started their careers in the military and would 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 is the most common type of home mortgage loan for nurses and the general population.
Pre-Approval
Once you provide your lender with all the information they ask for, and they are willing to approved your loan, 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 give you a step up in your home search, as sellers will see that you have loan approval. This tells them the chances of your offer falling through are small. This also helps you understand what price range you should be looking at houses.
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. You might be surprised at the options your lender has for you!
At Homes for Heroes, we understand that healthcare workers can have some challenges with shift work and overtime when it comes to loans. We also understand that most healthcare workers don’t work a typical 9-to-5 shift. Our lenders are willing to work around any challenges you may have during the home buying process and work to get you the loan you need. Sign up now to talk to one of our mortgage specialists today.
Step 3: Find a Real Estate Agent
Once you have your pre-approval, you can find a real estate agent to get you the house you are looking for. Real estate agents are necessary for buying a home, and will be your best advocate with the sellers. They also understand the homes in your budget as well as your community, and keep their eye out for the things you’re looking for in your dream home.
At Homes for Heroes, we can connect you to both lending specialists and real estate agents in your community. We have the largest network of both lenders and real estate specialists of any similar program in the country. By signing up with Homes for Heroes first time home buyer program for healthcare workers, we match you with these specialists with no extra work or cost to you. As a hero in the healthcare profession, Homes for Heroes and our affiliates want to say thank you. To do that, we offer you Hero Rewards.
You’ll receive Hero Rewards after you close on your new home. When you buy and/or sell a home with one of our local real estate specialists in your area, you will receive a check for 0.7% of the purchase price, or $700 for every $100,000. 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. Sign up now with no obligation to talk to a real estate agent or mortgage specialist in your local community.
Step 4: Make a List
This can be very beneficial when buying your first home. There are so many things to consider 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. 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.
Another thing to consider is the state of the home. Is it new construction that requires no work once you move in? Or is it a fixer upper that will need immediate or extensive attention? If you do not have the time or resources to fix up a home, you’ll want to put that on your list too. 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.
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 nurse, you might not have time for yard maintenance. That could make you an ideal candidate for a townhouse or a condominium, where yard work is usually taken care of. Or maybe you have plans to become a landlord down the road, and are looking for a duplex. 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 just won’t work.
Step 5: 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. Don’t be discouraged if you look at more than a few homes. Sometimes, seeing a home in person can actually help you see what kind of things you don’t want. The more you look at homes and give feedback, the more narrow your agent’s search to find the perfect home.
Once you find a home that you just have to have, it is time for your real estate agent to submit your offer on your behalf.
Step 6: Making an Offer
Making an offer on your first home can be exciting but stressful. Your real estate agent will discuss with you how much you would like to pay for the home, if there are any stipulations or requirements you want to add to your offer, and the terms of closing. Then they will submit your offer to the sellers. If your offer is accepted, 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, agreeing or 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 and start the process of looking for a different home.
Step 7: Now What?
Just because your offer is accepted doesn’t mean you own the home, yet. There are several things that need to happen before your closing date, when you cross your t’s and dot your i’s. 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.
If they find something wrong, like a crack in the foundation, you can potentially negotiate a lower sale price. You can take the savings in price and apply those savings to fix the problem. You can even use your Hero Rewards to fix anything that shows up on your inspection!
Another thing that will need to happen before you close is a home appraisal. These are required 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.
Step 8: Close and Move
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 before your closing date to let you know what you’ll need to bring to closing, along with what your 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 with your down payment and closing costs, among many other items.
Generally, you’ll also do a final walkthrough a day or less before closing, to ensure that the home is clear of all the previous owner’s possessions, unless agreed upon, and that there are no other breaches of the 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 healthcare worker is exciting, and Homes for Heroes wants to help. Our mission is to serve every hero, including healthcare workers, police officers, 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.
