First-Time Home Buyer

What Does It Mean to Be a First-Time Home Buyer?

Being a first-time home buyer can be an exciting but anxious time. Educating and preparing yourself about buying your first home is the best way to calm those nerves. And to do that, you don’t have to look any further. A first-time home buyer is an individual who meets any of the following criteria:
  • An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time home buyers).
  • A single parent who has only owned with a former spouse while married.
  • An individual who is a displaced homemaker and has only owned with a spouse.
  • An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
  • An individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.

How Do I Know If I'm Ready To Own a Home? 

Understanding the Mortgage Process

We’ve broken down the loan process for first-time home buyers in order to help you prepare for one of life's biggest purchases.
  1. Application: The first step towards being a first-time home buyer is getting your home loan application underway. A great first-time home buyer tip at this stage is to make sure you have your basic personal and financial information at hand when beginning your home loan application. Your credit score, current employment status, debt and long-term financial goals will all be collected and discussed at this point in the mortgage process.
  2. Pre-Approval: Not to be mistaken with a pre-qualification, a home loan pre-approval is a mortgage company’s commitment to issue a home loan for a specific property. This will be based off of your employment, credit and debt information.
  3. Processing: This stage in the mortgage process will involve various documents, so please make sure you are prepared and as organized as possible coming into this step for the smoothest and quickest experience. While you may provide documents to your home loan expert at the beginning of mortgage processing, you may also be asked for additional information throughout any time during this stage, depending on your home loan type and financial situation.
  4. Underwriting: During this mortgage process stage, someone known as an “underwriter” will review your application to make sure that your home and property are in good condition and that you’ll be able to repay your home loan.
  5. Closing: You, the sellers, your home loan expert and possibly your attorney will decide on a date to close on. At closing, you’ll sign many documents, which include your mortgage note and HUD-1 Settlement Statement. Once complete, you’ll be handed your keys and will have successfully become a home owner!

If you’re still unsure if you’re ready to buy your first home, we offer useful tools to help you better understand your first mortgage and your payment options. For example, try one of our mortgage calculators to see if you should buy a home (versus rent), see how much a monthly mortgage payment would be for you and even how much home you can afford! Popular Home Loan Options For First-Time Home Buyers: 30 Year Fixed Rate Mortgages, FHA Loans, ARM Loans, and VA Loans.

Navigating the range of home loans to find one that best meets your needs can be a difficult process, especially for first-time buyers. To make things easier, the federal government and the state of Minnesota offer insured home loans tailored to first-time home buyers. These loans offer attractive benefits that can make the home-buying experience less costly and less restrictive. First-time home buyer loans typically offer a lower down payment, reduced interest, limited fees and the possibility of deferring payments. These types of loans are offered at a federal level by the Federal Housing Administration and by most states. The FHA defines a first-time home buyer as a person who has never owned a home or has not owned a home for at least three years. 

The comparatively lower restrictions on these loans make them ideal for first-time home buyers. You might want to consider these loans if:
  • You don’t have enough money saved up for a large down payment.
  • You have a limited ability to meet high interest payments and fees.
  • Your credit score is not high enough to qualify for other loan types.