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- Buying a home might be the most important financial transaction of your life.
- Many people need mortgages to help finance their homes.
- We asked an expert for advice on mortgages for first-time home buyers.
- Visit Business Insider’s homepage for more stories.
Buying a home might be the most important financial transaction you’ll make in your life.
If you’re looking to become a homeowner, you’ll likely be considering a mortgage to help you finance the purchase.
We asked Danny Gardner, Freddie Mac’s senior vice president of single-family affordable lending and access to credit, for his best advice on mortgages for first-time home buyers.
From finding down-payment resources to understanding lender fees, here are eight things Gardner thinks every home buyer should know about mortgages:
A 20% down payment is not a requirement
"The one prevailing myth about home purchasing is that you are required to put down 20%," Gardner said. While you will usually get a lower interest rate if you have a 20% down payment, he noted, "that is not the threshold for achieving mortgage financing."
Freddie Mac provides a secondary market to buy mortgages from lenders so they can write more mortgages. While you will never deal directly with Freddie Mac, it has programs designed to help low income borrowers and first-time home buyers qualify for loans with down payments as low as 3%.
There are thousands of programs to help homebuyers make down payments
Many states and cities have down payment assistance programs to help you with financing. Gardner recommends checking this listing of programs to see if there’s one you qualify for.
"Not all lenders participate in these programs," Gardner said, adding that "matching a lender to a program by yourself can be challenging."
If you want to take advantage of a down payment assistance program, he recommends getting a list of approved lenders from the agency.
If you’re not careful, your mortgage applications could hurt your credit score.
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If your credit report is pulled too many times, it can negatively affect your score.
To combat this, Gardner suggests pulling your own credit report (which you can do for free) and bringing that to lenders to get informal rate quotes.
Once you’re ready to apply for a loan, your lender will need to pull your official credit report, but you can avoid having it pulled repeatedly, and you can also avoid lenders’ credit check fees by pulling your credit score on your own.
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