Purchasing your first home is a major life milestone – and one of the largest financial commitments most people ever make. While exciting, the mortgage process can also feel overwhelming for first-time buyers.
This guide provides a step-by-step roadmap, designed to walk you the key stages of getting a first mortgage, so you feel empowered, informed, and ready to take the leap into homeownership. In celebration of National Homeownership Month, there’s no better time to explore what it takes to make your dream a reality.
Understand What You Can Afford
- Start with your budget: Before browsing listings, assess your income, existing debts, and monthly expenses.
- Use a mortgage affordability calculator to get a ball park range of what you may qualify for.
- Include anticipated costs like property taxes, homeowners insurance, and HOA fees to get a realistic picture.
- Rule of thumb: Total housing costs should stay under 28-30% of gross monthly income.
Check and Improve Your Credit Health
- A better credit score typically equals a lower interest rate.
- Request a free credit report and check for inaccuracies.
- Pay down revolving debt and avoid large purchases or new credit accounts before applying.
- Aim for a credit score of 620+ for most loans, with better terms available at 740+.
Save for More Than the Down Payment
- While down payments get most of the attention, don’t overlook other upfront costs:
- Closing costs (2-5% of home price)
- Prepaid taxes and insurance
- Home inspection and appraisal fees
Learn the Mortgage Options Available
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- Common loan types include:
- Conventional loans: Typically require higher credit scores and larger down payments.
- FHA loans: More accessible for first-time buyers with smaller down payments (as low as 3.5%).
- VA/USDA loans: Offer benefits for eligible borrowers.
- Understand fixed vs. adjustable rates and the pros and cons of different loans terms (e.g., 15-year vs. 30-year).
- Common loan types include:
Get Pre-Approved for a Mortgage
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- Pre-approval is more than a quick online quote—it’s a formal process involving verification of income, credit, and assets.
- Helps you shop with confidence and shows sellers you’re a serious buyer.
- Compare pre-approvals from multiple lenders to evaluate interest rates, terms, and estimated closing costs.
Find the Right Mortgage Partner
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- Look beyond the rate: prioritize clear communication, responsive service, and a lender who will walk you through the process.
- Local institutions can offer added value through personal service and community knowledge.
- Ask questions about rate locks, underwriting timelines, and how the lender handles common mortgage delays.
Start Your Home Search
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- Use your pre-approval range as a ceiling—not a goal.
- Stay realistic about what your budget can buy and be aware of bidding wars, inspections, and contingencies.
- Avoid waiving protections (like inspections or appraisals) that could cause major headaches later.
Make an Offer and Finalize Your Loan
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- Once your offer is accepted, the mortgage process kicks into high gear.
- You’ll finalize documentation, lock your rate (if you haven’t), and prepare for underwriting.
- Schedule a home inspection, respond to lender requests promptly, and avoid large financial changes (like new loans or job shifts).
Prepare for Closing Day
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- Review your closing disclosure carefully—it details loan terms, monthly payments, and final cash needed.
- Do a final walk-through of the property before closing.
- Bring proper ID and funds to close. Expect to sign a lot of documents!
Manage Your Mortgage and Plan Ahead
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- Set up automatic payments to avoid missed due dates.
- Understand how escrow accounts handle taxes and insurance.
- Start building equity and budgeting for future upgrades or repairs.
- Revisit mortgage terms periodically—especially if rates drop or your financial situation improves.
Having Penn Community Bank as your mortgage partner can make a meaningful difference in navigating your homebuying journey.
Discover our variety of home mortgage options and home equity loans and lines of credit. Contact us today to learn how we can help you finance your dream home.
