A plain-English guide to buying your first home.
Budgeting, assistance programs, credit and the words you will hear along the way, written for people buying in Metro Atlanta for the first time.
Start with the monthly payment, not the price.
The price of a home matters less than whether the monthly payment fits your life. That payment usually includes principal, interest, property taxes, homeowners insurance and, for some loans, mortgage insurance or HOA dues.
Here is a made-up example. Imagine a household earning $6,000 a month before taxes, with a $450 car payment and a $150 student loan payment. They decide a housing payment of about $1,500 a month, all-in, leaves room for savings, upkeep and the rest of life. Their total monthly debt would then be $2,100, about 35% of their gross income. A lender will look at that ratio, and so should they.
They also plan for cash beyond the down payment: closing costs, a move, and a cushion for the first repair. Lenders set their own limits, so the right number for you comes from your budget and a conversation with a lender. Session One of the seminar series walks through this with your own numbers.
Help with the down payment may be available.
The State of Georgia offers homeownership programs, including the Georgia Dream program, that provide down-payment assistance for eligible buyers, including first-time buyers, with income and purchase-price limits that change.
- Programs are run through participating lenders, so ask any lender you talk to whether they take part
- Eligibility depends on household income, purchase price, location and whether you have owned a home recently
- Many programs ask you to complete a homebuyer education course before closing
- Limits and terms are updated, so always check the current details at the source
Current program details are published by the Georgia Department of Community Affairs. Look for the Georgia Dream homeownership pages.
Luxe does not run or decide eligibility for any assistance program. This summary is general information, not advice.
Know what a lender will see.
Your credit reports affect whether you are approved and what a loan costs. Errors happen, and it is easier to deal with them before you apply than in the middle of a purchase.
- Get your free reports from Equifax, Experian and TransUnion
- Check personal details, accounts, balances, late payments and inquiries
- Dispute anything inaccurate directly with the bureau that reports it
- Avoid opening new credit while you are shopping for a home
The Credit Ready program walks you through these steps with DisputeValet.com, self-help credit dispute software you operate yourself.
DisputeValet.com is self-help software. It is not a credit repair organization and does not guarantee any change to your credit report or score.
Fifteen terms, in plain English.
- Pre-qualification
- A quick estimate of how much you might borrow, based on information you give a lender. It is a starting point, not a commitment.
- Pre-approval
- A lender's written statement of how much it is prepared to lend you after checking your credit, income and assets. Sellers often expect one with an offer.
- Debt-to-income ratio (DTI)
- Your monthly debt payments, including the new housing payment, divided by your gross monthly income. Lenders use it to judge how much payment you can handle.
- Private mortgage insurance (PMI)
- Insurance that protects the lender, often required on conventional loans when the down payment is under 20%. You pay for it, usually as part of the monthly payment.
- Earnest money
- A deposit you make with your offer to show you are serious. It is usually held by a third party and applied to your costs at closing.
- Escrow
- Money held by a neutral party. It can mean the deposit held during the sale, or an account your lender uses to pay property taxes and insurance.
- Closing costs
- Fees and prepaid items due when the sale closes, such as lender fees, title charges, recording fees and prepaid taxes and insurance. They are separate from the down payment.
- APR
- Annual percentage rate: the yearly cost of a loan including the interest rate and certain fees. It helps you compare loan offers on equal terms.
- Points
- Optional fees paid at closing to lower your interest rate. One point usually equals 1% of the loan amount.
- Appraisal
- An independent estimate of the home's value, ordered by the lender. If it comes in below the price, you may need to renegotiate or bring more cash.
- Contingency
- A condition in your offer that must be met for the sale to go ahead, such as a satisfactory inspection, an appraisal or final loan approval.
- Title insurance
- Insurance that protects against problems with the ownership record, such as an old lien or a recording error. Lenders require a policy for themselves; an owner's policy protects you.
- HOA
- Homeowners association: the group that manages shared areas in some neighborhoods and condominiums. It charges dues and sets rules you agree to follow.
- Fixed vs. adjustable rate
- A fixed-rate mortgage keeps the same interest rate for the whole loan. An adjustable-rate mortgage starts at one rate and can change later on a set schedule.
- Loan estimate
- A standard three-page form a lender gives you after you apply, showing the expected rate, monthly payment and closing costs. Use it to compare lenders side by side.
First-time buyer FAQ.
Do I need a 20% down payment?
Not always. Many loan types allow smaller down payments, though a smaller down payment can mean mortgage insurance and a higher monthly cost. A lender can show you the options for your situation.
Who counts as a first-time buyer?
Definitions vary by program. Some count anyone who has not owned a home in recent years, not just people who have never owned. Check the rules of the specific program or loan.
How long does buying a home take?
It depends on your finances and the market. Many buyers spend a few months getting ready and searching, and closing typically follows a few weeks after an accepted offer.
Should I check my credit before talking to a lender?
Yes. Reviewing your own reports first gives you time to dispute anything inaccurate and means fewer surprises during pre-approval.