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Part 1: Answering Your First Time Home Buyer Questions with BuzzFeed

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At realtor.com, we know buying a home is an exciting journey that can also be complicated and daunting, especially for first-time home buyers. For the second year in a row, realtor.com has partnered with BuzzFeed to help demystify the home-buying process. As part of this year’s partnership, we asked first-time home buyers to send us their questions. The BuzzFeed Community posed some great questions about the first-time home buying process and we wanted to help provide answers to more of those questions. Many of the questions we received fell into two buckets — preparing for home buying and home buying itself. Working with our internal experts, and third-party real estate and mortgage professionals, this blog post answers your questions related to creditworthiness and preparing for the home buying journey.

My wife and I made not so great decisions in regards to our credit. We recently have been given the opportunity to save quite a bit. How much will our credit affect our ability to get a mortgage if we have a hefty down payment? –Facebook_10208645960081437

Depending on what your credit score is, there might not be a big effect on your ability to get a mortgage. Most lenders require a minimum 620 credit score for the various loan programs. However, there are some niche loan products out there that will allow a lower than 620 credit score, if there are compensating factors. For instance, placing a large amount down and/or having a low Debt-To-Income ratio. We would suggest contacting a mortgage broker who has access to a wide variety of loan products.

Dara Delgado (NMLS #1510172)

What is the lowest credit ratings most banks will take? –Hafers85

While FHA will go down to 500 and Fannie/Freddie will go down to 620, many large retail banks have overlays on the guidelines which push those minimums up. If you’ve been turned down by a large retail bank due to credit score, it would improve your chances to work with a mortgage bank with direct access to conventional and government products.

Faramarz Moeen-Ziai (NMLS #342090)

What type of credit score do you need to buy a home? What should your credit be? –Aleed; Colmita

This really depends on the specific loan structure that you’re targeting.  If you’re looking for a standard conventional loan, you will be eligible for financing with a credit score as low as 600.  FHA will go down to 500 but other factors could come into play.  If you’re looking for jumbo financing (over $480,000 across the country and over $726,500 in high cost areas), you will need a minimum credit score of 700 for most programs.  Community Development Financial Institutions have special jumbo programs available for applicants with credit scores down to 640, but that is very rare.  

Faramarz Moeen-Ziai (NMLS #342090)

If your credit is bad can you realistically qualify for anything to help buy a home? if you don’t qualify for anything, how long does it take before you can? –Aleed

FHA offers programs that allow for extremely low credit scores. Borrowers with low credit scores should consult with a mortgage professional because qualification might really depend on the exact reason for the low score. Things like bankruptcy, foreclosure, and short sales could result in specific time constraints based on guidelines, but even in cases of the aforementioned events, borrowers could be eligible for some alternative types of financing that have recently become available. 

Faramarz Moeen-Ziai (NMLS #342090)

I live in an area with lots of tourist properties/rentals as well as lots of big, expensive homes. Housing stock for starter homes (e.g. 2-bed, 1-bath and a yard) is very limited. How can I navigate being a first-time home buyer who is constrained by limited options? –Snail

First stop, have an in-person meeting with a reputable lender. This will help you get on the right path for purchasing a home especially in a competitive market.

Gonzalo Mejia, realtor.com REAL Ambassador

Purchasing a home can be a daunting prospect, becoming familiar with a trusted search portal, like realtor.com, is a great place to start. Consider expanding your search criteria and, more importantly, your geographical region. Write a list of “must have’s” and a list of “would like’s”. This will help you set manageable priorities when you meet with an agent.

Drew Coleman, realtor.com REAL Ambassador

My area has suffered several consecutive years of natural disasters (floods and hurricanes). This might be the new normal for where I live, given climate predictions for sea level rise, storms, and floods. I’m a young adult looking at buying a home for the first time. I’m worried that at some point in my lifetime the scales will tip for insurance and property values. I’m worried property where I live will become a liability rather than an investment. Advice? –Snail

The fact that you’re thinking ahead is a huge plus! We have already seen evidence of slower home price growth in coastal areas prone to hurricanes, so these changes truly can impact the real estate market. One option is to move to an area that’s less prone to these risks. Of course, if you’re committed to staying in the area you currently live, look into ways to reduce the risk. You might consider buying a home in an area that’s less risky–further away from the coast and not as low lying. You can also look into property upgrades that can help reduce your property’s risk (and potentially your insurance rates as well).


Is it better to have a higher down payment or a higher credit score? ShondaLeigh  

That’s a great question, but also a tricky one. Many lenders would consider someone with a lower credit score a better candidate for a government-insured loan program, because it allows for lower credit scores and down payments. However, this type of loan program comes with higher closing costs including a program fee (i.e. FHA/VA Funding Fee). On the other hand, someone with a higher credit score and lower down payment would receive the benefits of Fannie and Freddie’s LLPA risk-based pricing adjustments, which naturally reward lower-risk consumers with higher credit scores better pricing for market rates and can aid them in securing a lower monthly payment for mortgage insurance (MI) should they have less funds to use toward a down payment. In fact, those with higher credit scores typically are able to access better interest rates, subject to the type of property being financed (i.e. primary residence, single-family) down payment and DTI.

Jeff Chalmers (NMLS #76803)

Want to learn more? Head over to the realtor.com first-time home buyer resource center and stay tuned for Part 2 where we’ll respond to questions about down payment programs and making an offer.

Special thanks to realtor.com’s Danielle Hale and Brad Sivert, as well as to the third-party real estate professionals who shared their expertise: Jeffrey Chalmers (NMLS #76803), Dara Delgado (NMLS #1510172), Faramarz Moeen-Ziai (NMLS #342090) and all of our realtor.com REAL Ambassadors: Thai Hung Nguyen, Rita Tayenaka, Jennifer Hisey Wauhob, Alexa Sanchez, Max Diez, Gonzalo Mejia, Darryl Macha, Drew Coleman, and Hagan Stone.

The above responses are general in nature and not based on anyone’s specific circumstances and is not intended to be comprehensive.  Please consult with experienced professional advisors on any home or financing opportunity.  Lenders, mortgage brokers and other loan professionals are not recommended or endorsed by realtor.com®, and are not the only providers of mortgage loan services of the kinds they offer. Responses provided by third-party professionals do not represent the opinion of realtor.com® or its operator, Move, Inc.

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