4 Better Ways To Use Your Bank When You Buy Your First Home, According to an Expert
Written by
Sean Bryant
Edited by
Amber Barkley
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Buying your first home can be exciting and scary. It will easily be the biggest purchase you ever make, and the mortgage will likely be part of your monthly budget for many years. While it’s possible to go through the process on your own, having people on your side can make everything much smoother.
Real estate agents are great resources, because they understand the local market and area where you’re looking to buy. However, many people don’t know that their bank can also be a great source of information and tools to make buying a home easier.
Keep reading to explore ways you can utilize your bank as a first-time homebuyer.
Understand Your Credit Score
When starting the home-buying process, the first thing you need to do is check your credit score. This will give you an idea about whether or not you’ll be able to get the best possible interest rates.
Most banks today provide access to monthly credit scores from at least one of the major credit bureaus. This will give you insight into your credit score before shopping for mortgages.
Remember that if you plan to use a conventional loan, you’ll need a credit score of at least 620. If you use an FHA loan, popular for first-time homebuyers, you can get away with a credit score as low as 500 if you’re planning on a 10% down payment, or 580 with a 3.5% down payment. However, you’ll want to aim for a credit score of at least 740 to 760 or higher to receive the lowest possible rate.
Take Advantage of Online Tools and Resources
Most banks have developed robust tools and resources for potential first-time homebuyers. These include affordability calculators to help you understand how much home you can afford and the resources available if you have financial problems after purchasing your home. The goal is to give you everything you need to have a successful home-buying experience.
“Banks often provide educational resources and counseling services to guide first-time buyers through the mortgage process,” said Kwame Darko, founder of KD Buys Houses. “This can include one-on-one consultations, workshops and online tools that explain everything from credit scores and loan types to the overall home-buying process.
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“Accessing these resources can help buyers make informed decisions, avoid common pitfalls and feel more confident throughout their journey.”
Get Pre-Approved
Once you’re ready to move forward, getting pre-approved for a loan is a good idea. Most banks will allow you to go through the pre-approval process. This will allow the lender to do a deep dive into your credit report and financials to make sure you’ll be a good borrower.
Remember that getting pre-approved will require a hard pull on your credit, which will lower your credit score by a few points. However, going through this process will save you time once you’re ready to move forward with the application and also let the seller know you’re serious about purchasing.
“One of the most valuable services banks provide is the pre-approval process,” said Darko. “By getting pre-approved for a mortgage, first-time buyers can determine their budget and strengthen their negotiating position. This step not only clarifies the loan amount they can expect but also demonstrates to sellers that they are serious and capable of closing the deal.
“This can be a game-changer in competitive markets where sellers are looking for assurances of a smooth transaction.”
Take Advantage of First-Time Homebuyer Programs
Many banks are doing their best to give people who want to become homebuyers the things they need to get started. For example, Chase has a homebuyer grant where first-time homebuyers can get up to $7,500 toward a new home in select areas. Plus, their DreaMaker mortgage allows you to buy a home with as little as 3% down.
One of the worst parts of the home-buying process can be how long it all takes from start to finish. Some banks even have programs to give you peace of mind that the process will move along and that you can close within the timeframe they give you. Nbkc bank will give both buyers and sellers $2,500 if the loan doesn’t close on time. For eligible products, Chase will guarantee you’ll close on time — within three weeks — or they’ll give you $5,000.
“Many banks offer specialized programs designed specifically for first-time home buyers,” added Darko. “These programs often include benefits such as lower down payment requirements, reduced interest rates and even grants or subsidies to assist with closing costs. Utilizing these programs can significantly lower the upfront costs and make homeownership more accessible to those who might otherwise struggle to save a substantial down payment.”
The Bottom Line
If you’re thinking about purchasing your first home, there’s a lot to know to ensure a positive experience. Luckily, your bank has many resources and programs available to help make the process as easy as possible.
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