First-Time Home Buyer's Guide

Understanding the Mortgage Process

Buying your first home is one of the most exciting milestones in life, but it can also feel overwhelming if you do not know what to expect. The mortgage process is more straightforward than most people think, and understanding each stage helps remove the uncertainty that causes stress for many first-time buyers.

At its core, the mortgage process has five major stages: pre-approval, house hunting, making an offer, underwriting, and closing. Pre-approval tells you how much you can borrow based on your income, debts, and credit profile. Once you have a pre-approval letter in hand, you can shop for homes within your budget with confidence. After you find a home and your offer is accepted, the lender verifies all your financial information during underwriting. Finally, at closing, you sign the paperwork, the funds are transferred, and you receive the keys to your new home.

The entire process typically takes 30 to 45 days from the time your offer is accepted to the day you close, though the timeline can vary depending on the complexity of your situation and how quickly documents are provided.

Getting Pre-Approved

Pre-approval is the single most important first step for any buyer, and it is especially critical in a competitive market like Austin. A pre-approval letter shows sellers and real estate agents that a lender has reviewed your finances and is willing to lend you a specific amount. Without one, most sellers will not seriously consider your offer.

During pre-approval, your lender will review your credit score, employment history, income, debts, and assets. You will typically need to provide recent pay stubs, two years of W-2s or tax returns, bank statements, and a valid ID. The lender uses this information to determine the maximum loan amount you qualify for and the interest rate you can expect.

It is important to understand that pre-approval is different from pre-qualification. Pre-qualification is a quick estimate based on self-reported information, while pre-approval involves a thorough review of verified documents. In a competitive market, sellers strongly prefer buyers who have been fully pre-approved.

Start your pre-approval with The Styer Team and you will know exactly where you stand before you begin shopping for homes.

Types of Loans for First-Time Buyers

One of the biggest decisions you will make is which type of mortgage is right for you. Each loan program has different requirements for down payment, credit score, and eligibility, so understanding your options helps you choose the one that fits your financial situation.

Conventional loans are the most common type of mortgage. They typically require a minimum credit score of 620 and a down payment as low as 3% for first-time buyers. If you put down less than 20%, you will pay private mortgage insurance (PMI), which is removed once you reach 20% equity in the home.

FHA loans are backed by the Federal Housing Administration and are designed for buyers with lower credit scores or smaller down payments. You can qualify with a credit score as low as 580 and a down payment of just 3.5%. FHA loans do require mortgage insurance for the life of the loan if you put down less than 10%.

VA loans are available to eligible veterans, active-duty service members, and qualifying surviving spouses. These loans offer some of the best terms available, including zero down payment, no PMI, and competitive interest rates.

USDA loans are designed for buyers in eligible rural and suburban areas. They offer zero down payment and reduced mortgage insurance costs for buyers who meet income limits.

Explore all of our loan programs to find the right fit for your situation, or reach out and we will walk you through the options together.

Down Payment Options

The down payment is often the biggest hurdle for first-time buyers, but the reality is that you do not need 20% down to buy a home. While putting 20% down eliminates the need for mortgage insurance on conventional loans, there are many programs that allow you to buy a home with far less.

As mentioned above, conventional loans allow as little as 3% down, FHA requires 3.5%, and VA and USDA loans require no down payment at all. For a $350,000 home, a 3% down payment would be $10,500 compared to $70,000 at 20%. That difference can make homeownership accessible years earlier.

Additionally, many first-time buyers qualify for down payment assistance programs. The state of Texas and the city of Austin both offer programs that provide grants or low-interest second loans to help cover down payment and closing costs. These programs have income and purchase price limits, but they can significantly reduce the cash you need at closing.

Gift funds from family members are also an option for most loan programs, as long as the donor provides a signed gift letter confirming the funds do not need to be repaid.

What to Expect at Closing

Closing day is when ownership of the property officially transfers to you. In the days leading up to closing, your lender will provide a Closing Disclosure document that outlines every cost associated with your loan, including the interest rate, monthly payment, closing costs, and the total amount of cash you need to bring.

You are legally entitled to receive the Closing Disclosure at least three business days before closing, giving you time to review every line item and ask questions. Compare it carefully to the Loan Estimate you received when you first applied to make sure there are no unexpected changes.

At the closing table, you will sign the final loan documents, the promissory note (your promise to repay the loan), and the deed of trust (which gives the lender a lien on the property). You will also need to bring a cashier's check or arrange a wire transfer for your down payment and closing costs. Once everything is signed and the funds are disbursed, the home is officially yours.

Closing costs in Texas typically range from 2% to 4% of the purchase price and include fees for the appraisal, title insurance, escrow, recording, and lender origination. In many cases, you can negotiate with the seller to cover some or all of these costs as part of your purchase contract.

Tips for a Smooth Mortgage Experience

After helping hundreds of first-time buyers in Austin, here are the tips that make the biggest difference in ensuring a smooth and stress-free process:

• Do not make major financial changes after you are pre-approved. Avoid changing jobs, making large purchases, opening new credit accounts, or moving money between bank accounts without talking to your loan officer first. Any of these actions can affect your qualification.
• Respond to document requests quickly. Your lender will ask for additional documents during underwriting. The faster you provide them, the faster your loan can close. Delays in documentation are the number one cause of delayed closings.
• Keep all your financial documents organized. Before you start the process, gather your pay stubs, tax returns, bank statements, and identification in one place. Having everything ready from the beginning speeds up every stage.
• Get a home inspection. Even though it is not required by your lender, a professional home inspection protects you from costly surprises after you move in. It is one of the best investments you can make during the buying process.
• Communicate openly with your loan officer. If your financial situation changes or you have questions at any point, let your loan officer know immediately. There is almost always a solution, but only if we know about the issue early.
• Budget beyond the mortgage payment. Remember to account for property taxes, homeowners insurance, HOA fees (if applicable), utilities, and maintenance when calculating what you can comfortably afford each month.

Buying your first home is a major achievement, and with the right preparation and the right team behind you, it does not have to be stressful. The Styer Team has guided hundreds of Austin buyers through this process, and we would love to help you too.