First-Time Homebuyers’ Guide to Mortgages

Buying a home for the first time is an exciting milestone, but navigating the mortgage process can feel overwhelming. Understanding your options and what lenders look for can make the experience smoother and help you secure the best deal. This guide outlines the essential steps for first-time homebuyers in Lincoln, NE, with insights tailored to LincOne Federal Credit Union’s mortgage services.

Understanding Mortgage Basics

A mortgage is a loan designed specifically for buying a home or refinancing to change the terms of the loan.  First-time buyers should familiarize themselves with key mortgage terms to make informed decisions:

• Principal: The amount borrowed to buy the home.

• Interest: The cost of borrowing, expressed as a percentage of the loan.

• Down Payment: The upfront payment made when purchasing a home, often ranging from 3% to 20% of the home price.

• Loan Term: The duration of the loan most commonly 15 or 30 years. 

Before applying for a mortgage, assess your financial health by calculating your debt-to-income ratio (DTI) and reviewing your credit score. Lenders use these factors to determine your loan eligibility. Learn more about how credit impacts your homebuying journey by exploring LincOne Federal Credit Union’s credit resources.

Types of Mortgages

Choosing the right mortgage depends on your financial situation, long-term goals, and the type of home you plan to purchase. Common mortgage types include:

Fixed-Rate Mortgages (Conventional Loan)

With a fixed-rate mortgage, your interest rate remains constant throughout the loan term. This stability makes budgeting easier, particularly for first-time homebuyers. LincOne offers competitive rates on fixed-rate loans to help you plan with confidence.

FHA Loans

Insured by the Federal Housing Administration, FHA loans are popular among first-time buyers because of their lower credit and down payment requirements. This can be an excellent option for buyers seeking affordability.

VA Loans

Eligible veterans and active-duty service members can access VA loans, which require no down payment and have favorable terms. LincOne Federal Credit Union supports service members in their journey to homeownership. Our very own Mortgage Loan Officer, Alyssa McManus is a veteran in this space! 

Adjustable-Rate Mortgages (ARMs)

ARMs start with a lower interest rate that adjusts periodically based on market conditions. While this option can save money initially, it comes with the risk of higher payments if rates increase. Consider this option carefully and consult a LincOne mortgage advisor for guidance.

Steps to Secure Your First Mortgage

Determine Your Budget: Calculate how much house you can afford, factoring in down payments, closing costs, and monthly payments. Use a mortgage calculator to estimate costs.

Submit a Formal Application: Once you’ve chosen a lender, complete your application and provide the necessary documents, such as tax returns and financial institution statements.

Choose the Right Loan: Based on your financial goals, decide which mortgage type aligns with your needs, with the guidance of your Mortgage Loan Officer if needed. 

Get Pre-Approved: Obtain a mortgage pre-approval from your lender to show sellers you’re a serious buyer. This involves providing proof of income, employment history, and credit information.

Submit an Offer: Submit an offer on a home, and present the accepted contract to your Mortgage Loan Officer. 

Close the Loan: After approval, you’ll attend a closing meeting to sign the final documents and receive the keys to your new home.

Tips for First-Time Homebuyers

Save for Closing Costs: In addition to your down payment, budget for closing costs, which typically range from 2% to 5% of the purchase price.

Build Your Credit: Strengthen your credit score before applying for a mortgage to qualify for better terms. Explore LincOne’s credit-building tools to get started.

Understand Property Taxes: Research property tax rates in Lincoln to factor this recurring cost into your budget.

Stay Within Your Budget: While it’s tempting to stretch for your dream home, buying within your means ensures long-term financial stability.

Why Choose LincOne for Your Mortgage Needs?

LincOne Federal Credit Union is committed to helping first-time homebuyers achieve their dreams with affordable, straightforward mortgage solutions. By choosing LincOne, you’ll enjoy:

Competitive Rates: Access fixed and adjustable-rate mortgages with favorable terms.

Personalized Service: Work with a dedicated mortgage advisor who understands the Lincoln market.

Flexible Options: Explore loans tailored to fit various financial needs, including first-time homebuyer programs.

Explore LincOne’s mortgage services to start your homebuying journey with confidence.

Buying your first home doesn’t have to be daunting. By understanding your mortgage options and working with a trusted lender like LincOne Federal Credit Union, you can navigate the process with ease. Ready to take the first step? Visit LincOne Federal Credit Union’s homepage to learn more about how we can support your journey to homeownership.