Key Factors for First-Time Homebuyers
Finding the best bank as a first-time homebuyer depends on your specific financial situation, needs, and preferences. However, in the end, the best bank for a first-time homebuyer is one that offers competitive mortgage rates, excellent customer service, and a range of complementary services that align with your financial goals. If you’re not sure where to start, let’s take a look at the key factors that first-time homebuyers need to consider when working with any financial institution.
Low Down Payment Options
Before beginning the home loan search process, it’s important to assess your finances and determine the down payment amount you can afford. You must also understand how your down payment affects your monthly mortgage payments. As a first-time homebuyer, you may not have a lot of cash on hand for a down payment, plus you must also budget for closing costs and other fees such as title searches, appraisals, and legal paperwork. If that’s true, it’s important to find a home mortgage lender who will work with buyers who have a lower down payment to offer.
Competitive Interest Rates
Just because you have less money to put toward a down payment as a first-time homebuyer, it does not mean that you are automatically unable to qualify for competitive interest rates. Make sure you work with a lender who will consider multiple factors related to your loan eligibility, including your income and credit score, both of which can contribute to getting the lowest mortgage interest rate available.
Pre-Approval Process
Getting pre-approved for a mortgage strengthens your buying position and makes the offer to purchase process go much faster. It is also important to understand the difference between mortgage pre-approval and prequalification. Pre-approval is a much more involved process that requires buyers to submit all their paperwork and work alongside their lender. As a first-time homebuyer, you want to make sure you feel supported and are working with your lender for pre-approval early in the process.
Customer Support and Educational Resources
The mortgage process does not end when you sign the paperwork and accept the keys to your new home. For most buyers, the mortgage goes on for another 30 years. Therefore, when choosing which bank to use as a first-time homebuyer, you need to pay attention to the features you will need after signing all the paperwork — far into the future. This includes resources and educational materials to support homeowners as well as excellent customer service from the lender. Research customer reviews and ratings for every lender you consider and ask for recommendations from friends, family, and your real estate agent.
Specialized First-Time Buyer Programs
Many financial institutions support first-time homebuyers with additional incentives such as homebuyer grants. At Hudson River Community Credit Union (HRCCU), for example, we sponsor a First-Time Homebuyer Dream Program which provides first-time homebuyers with a grant of up to $9,500 that can be put toward down payments or closing costs.
Programs such as the Homebuyer Dream Program are designed to take some of the stress and pressure off first-time buyers. It also qualifies us as the type of financial institution that is experienced and able to work with this special set of borrowers.
Top Banks for First-Time Homebuyers
Remember that the best lender for first-time homebuyers will always depend on your specific financial situation, credit history, and individual preferences. However, in general, you should be aware of some important traits related to different types of mortgage lenders that could make them a good match (or not) for your unique situation, including interest rates, fees, membership requirements, customer service, and more.
Credit Unions
Credit unions such as HRCCU often offer competitive interest rates on their mortgages, especially for their members. This also typically includes lower fees, such as those related to application and origination fees and closing costs, when compared to large banks. Credit unions are also known for their personalized customer service and willingness to work with members to capitalize on their individual finances.
Getting a mortgage from a credit union, however, does require credit union membership, which means you have to meet the eligibility criteria of that credit union. At HRCCU, anyone who lives, works, worships, or attends school in Saratoga, Warren, Washington, or Rensselaer counties or the towns of Cohoes, Watervliet, or Green Island qualifies for membership. You also qualify to be a member of HRCCU if a member of your immediate family meets one of those criteria.
The Big Banks
Working with one of the so-called “big” banks, such as Citi, Chase, or Bank of America, is another option for first-time homebuyers. Due to their size, these national banks have a lot of different mortgage products to offer, but their interest rates may not always be the most competitive. With the big banks, mortgage rates will vary greatly, depending on a customer’s creditworthiness based on each bank’s individual criteria.
In addition, big banks often have higher fees associated with mortgages, so make sure to check the fee list carefully. On the other hand, big banks do provide robust online accessibility and support to customers and are easy to access. The quality of the customer service can vary widely, depending on the institution and its number of local branches.
Online Banks — Quicken Loans Rocket Mortgage, Ally Financial
The key benefits of online banks are that their lack of physical locations reduces their overhead costs, and their online presence is quite robust. As a result, first-time homebuyers working with online banks may find that their interest rates are a bit lower, especially as compared to the big banks. The same is true when it comes to mortgage-related fees.
However, that lack of a physical location is also one of the major drawbacks to online banks since customer service is handled almost entirely over the phone, and customers do not have access to in-person banking services unless they live in large cities with branches.
Conclusion
As a first-time homebuyer, there is a lot to consider before committing to a bank for your mortgage loan. Ultimately, it’s important to make sure that you take the time to compare multiple lenders and get quotes from each one to ensure you are clear about the advantages of each option. Remember that rates and fees matter, but support from a trusted financial partner who is ready to help you build long-term financial success as you find the perfect new home is also critical.
For more information about the mortgage products offered at HRCCU, please visit our home mortgage page or contact us today for a personalized consultation.
