First-time homebuyer guide

The best loan is the one that fits comfortably within your budget. For some first-time buyers, that may mean a conventional mortgage — the type of home loan backed by a private lender like Wells Fargo. Others may find that a government-backed mortgage, such as an FHA or VA loan, is the better option. Ultimately, the right mortgage depends on your financial situation and eligibility.

Every homebuying journey is unique, but most buyers follow a few key steps. Start by preparing your finances, including your credit, savings, and budget. Next, get prequalified to understand how much you may be able to borrow. Then, shop for homes and make an offer when you find the right one. Once your offer is accepted, you'll complete steps like the home inspection, appraisal, insurance, and loan approval before closing on your new home.

Understanding your down payment options, credit, debt, and savings can help you prepare for homeownership. It’s also important to learn the difference between mortgage prequalification and preapproval so you can better understand your budget and be ready when it’s time to make an offer.

Down payment assistance programs typically provide help in the form of grants or loans, including deferred or forgivable loans. These programs are often offered by nonprofit organizations, government agencies, and state or local housing authorities. Each program has its own eligibility requirements, which may include a minimum credit score, income limits, and a specified debt-to-income ratio. Some programs also require completion of a homebuying education course.

While there’s no magic credit score that will guarantee you will be approved for a mortgage, generally speaking, first-time buyers need a score of at least 620 for a conventional mortgage. The higher your credit score, the more borrowing options you may have.

You can start by asking about their mortgage products, such as:

• What loan products do you offer?
• Do you offer programs for first-time homebuyers?
• What are your credit requirements?
• What are the interest rate and annual percentage rate (APR) for a loan?
• How much will I need for a down payment?
• What are the escrow requirements?
• What will my estimated monthly payments be? 

It’s also important to ask about the lender’s services. For example, you may want to know how they prefer to communicate, how you can track the status of your loan, and whether they can provide references or customer reviews.

A lender will check your credit score and history, your debt-to-income ratio, which is a measurement of the amount of debt you have compared to your income, and take a general look at how much money you have in checking and savings accounts in order to be confident you’ll be able to pay for your mortgage, taxes, and other costs associated with buying a home.

• Learn more about your finances and how they impact buying a home
• Read tips on establishing and building credit

To get pre-approved for a mortgage, lenders typically ask for documents that verify your income, assets, and financial history. These may include:

• Recent pay stubs
• W-2 forms and/or tax returns from the past two years
• Bank statements and information about other assets
• Employment verification or contact information for your employer
• Identification, such as a driver’s license or Social Security number
• Information about current debts, including credit cards, student loans, or auto loans 

Depending on your situation, you may need to provide additional documentation. Your lender can guide you through the specific requirements.