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First-Time Homebuyer Guide: Apply for a Mortgage with Confidence

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Congratulations! You’ve made the exciting decision to become a homeowner. As a first-time homebuyer, the prospect of navigating the mortgage process might seem daunting. Not to worry – let’s lay out what to expect during your homebuying journey.



Before diving into the mortgage process, it’s crucial to assess your financial situation. Start by reviewing your credit score, as this will greatly impact your ability to secure a favorable mortgage rate and lower closing costs. Aim for a score of at least 640, but the higher, the better. You can meet with a financial counselor or loan officer to help you understand your credit score better. A loan officer can also calculate your debt-to-income ratio to determine how much you can borrow.



With your financial picture in mind, it’s time to explore the various mortgage options available. The most common types include:

  1. Fixed-Rate Mortgage: Offers a stable interest rate and consistent monthly payments over the life of the loan.
  2. Adjustable-Rate Mortgage (ARM): Features an initial fixed-rate period followed by adjustments based on market conditions.
  3. FHA Loan: Insured by the Federal Housing Administration, ideal for buyers with lower credit scores or smaller down payments.
  4. VA Loan: Reserved for veterans, active-duty service members, and eligible spouses, offering favorable terms and no down payment requirements.
  5. USDA Loan: Designed for rural homebuyers with low to moderate incomes, offering zero down payment options.
  6. Shared Equity Programs (such as Champlain Housing Trust, Windsor and Windham Housing Trust, Neighborworks of Western VT, Downstreet): State and federal funds provide down payments of 20-30% of the market value. When you sell, the home is sold through the housing trust to another qualified borrower with a portion of the appreciation going back into the program.
  7. Housing Finance Agency Loan: In Vermont, this is through Vermont Housing Finance Agency. These often provide grant funds and lower rates or closing costs to qualified buyers.

Research each option carefully to determine which aligns best with your financial goals and circumstances. A loan officer will also go over the options and give a recommendation of what is best for you.



Choosing the right lender is a critical step in the mortgage process. You want a lender that will be responsive and knowledgeable. Research lenders in your area, comparing interest rates, fees, products available, and customer reviews. Polling family, friends, and your realtor can be another way to gain helpful recommendations. While there are large national lenders to consider, remember that your local financial institutions also have mortgage programs to look into.


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Before you start house hunting in earnest, it’s highly recommended to get pre-approved for a mortgage. This involves submitting financial documents to a lender who will assess your creditworthiness and determine the amount you can borrow. Pre-approval not only gives you a clear budget but also demonstrates to sellers that you’re a serious, qualified buyer. Especially in today’s market, pre-approval is a necessary step. Be prepared to provide extensive documentation, including:

  • Proof of income (pay stubs, tax returns, the last two years of W-2s and/or 1099s for each applicant)
  • Asset statements (bank accounts, investment, retirement) for the last two months
  • Employment history (generally a full, two- year period is what a lender will look for)
  • Information on outstanding debts and liabilities, including an authorization to have your credit pulled



Congratulations on finding a home! At this point, your lender will likely want to see further or updated documentation including:

  • Proof of any deposits put down toward the home purchase
  • Verification of any large deposits within the past two months
  • Another pay stub for the most recent pay period
  • Contact information for the Realtor and/or Seller
  • Upfront loan disclosures

Completing your application accurately and promptly will expedite the approval process.



After submitting your application and additional documentation, the lender’s underwriting team will review your financial documents in detail to assess your creditworthiness and the risk associated with lending to you. This process typically takes about a week and may involve requests for further documentation or explanations of certain financial aspects.



Upon successful completion of the underwriting process, you’ll receive loan approval, contingent upon satisfying any remaining conditions. The lender will order an appraisal to determine the value of the home. Review the loan terms carefully, including the interest rate, loan amount, and closing costs. If everything looks good, it’s time to move forward to the next phase.



The final step in the mortgage process is closing on your loan, where you’ll sign all necessary documents and officially become a homeowner. This typically takes place at a title company or attorney’s office and involves paying closing costs, which can include loan origination fees, appraisal fees, and title insurance.



To ensure a smooth mortgage process, keep the following tips in mind:

  1. Stay Organized: Keep all financial documents organized and readily accessible throughout the process.
  2. Communicate Effectively: Stay in regular communication with your lender and promptly respond to any requests for additional information.
  3. Avoid Major Financial Changes: Avoid making major financial changes, such as switching jobs or making large purchases (like a new car), during the mortgage process, as this can impact your loan approval.
  4. Budget for Closing Costs: In addition to your down payment, budget for closing costs, which typically range from 2% to 5% of the home’s purchase price.
  5. Be Patient: The mortgage process can be lengthy and complex with lots of documentation, so remain patient and trust the expertise of your lender.


Navigating the mortgage process as a first-time homebuyer can be overwhelming, but with the right guidance, and preparation, it’s entirely manageable. By understanding your financial situation, researching mortgage options, getting pre-approved, and working closely with your lender, you’ll be well-equipped to secure the financing you need to purchase your dream home. Happy house hunting!


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About Abbie Jefferis

As a Mortgage Loan Origination Supervisor, Abbie Jefferis helps meet the mortgage needs of Vermont families with over 15 years of experience in the credit union industry. Abbie grew up in Essex, Vermont, and now resides in Jericho with her family. In her free time, she enjoys biking, eating Mexican food, and relaxing with her family and friends.


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