Five Tips for First-Time Homebuyers

Kara Miller & Nicole Myers, Farm Credit Home & Land Loan Officers

When considering the purchase of their first home, many prospective buyers aren’t sure where to start. Most have a clear vision of their dream property, but don’t know what they can afford, how to obtain financing, or what they should do to prepare.  Over the years, Farm Credit’s Home and Land division has helped thousands of first-time homebuyers successfully navigate the purchase process.  While each situation is unique, there are some principles that are broadly applicable and will prove helpful to anyone seeking homeownership. 

1. Establish Good Credit History

• Make on-time payments on any outstanding debt. Late payments will negatively impact credit scores and will be a disadvantage to those seeking mortgages.
• Avoid making minimum payments if possible. Try to pay your credit card balance in full each month.
• Develop—and stick to--a budget. Make sure that any new charges can be paid off monthly. This will reduce the amount of interest paid and will enable more of your payment to go toward paying down balances. 

2. Save! Save! Save!

• Save up money for down payment and closing costs. While a down payment of 20% or more can significantly reduce borrowing costs, there are financing options that require far less down--3%, 5%, 10% or even 0%. Closing costs will vary, due to differences in loan amounts and property types, however they typically range from 5-8% of the loan amount. Planning ahead and saving for these expenditures is key!
• Short-term sacrifices can produce great savings in the long run.
• Larger down payments often lead to reduced rates and more financing options.

3. Find a Lender and Explore Options

• Talk with your lender about the different loan options available.
• Do some research into products that may be applicable to your financial situation and goals. Private Mortgage Insurance (PMI) can be a new home buyer’s best friend, if a 20% down payment is out of reach.
• Plan for the costs associated with purchasing a home, which can include lender fees, title and legal fees, appraisal fees and realtor/broker fees.

4. Get Pre-Qualified

• Work with a lender to determine what price point you can afford.
• Don’t make any big purchases or major life changes after you get pre-qualified.  Lenders base their decisions on the circumstances presented to them; if there are changes to employment or debt load after pre-qualification, the pre-qualification may be revoked.
• If you don’t get prequalified for your desired purchase right away, it’s not over! Your lender will help guide you on the steps necessary to secure pre-qualification in the future.
• Interest rates are higher than they were in 2020, so ask your lender about any programs that would allow for downward adjustments if interest rates were to fall during the term of your loan.  Note modifications or refinancing may be options.  

5. Work with a real estate agent to find your dream house

• Many real estate agents are very knowledgeable with specific types of homes-- farms, large acreage, or residential properties, for example. Do your research on who specializes in the type of property you want to purchase.
• Springtime is typically when inventory peaks and more houses come on the market.
• Be patient-- the right opportunity will come!

To learn about the financing options available through Farm Credit, please visit horizonfc.com/loans.

Kara Miller has been a Farm Credit Home and Land lender for over five years. She specializes in home construction loans on larger acreage properties and has financed everything from traditional stick builds to bardnominiums.

Nicole Myers has been a Home and Land lender with Farm Credit for the last three years. She specializes in financing new home construction and bare land purchases.