Qualifying for a first time home buyers loan is a big step toward homeownership—but staying qualified is just as important. Lenders keep checking your finances up until the final loan approval and even right before closing. That means your financial habits during the home buying process can make or break your chance of owning a home.
If you’re a first time buyer, it’s important to understand what lenders expect from start to finish and how you can avoid common mistakes that could hurt your eligibility.
The home buying process usually begins with getting pre-approved for a mortgage loan. This gives you a clear idea of how much house you can afford and helps you narrow down your home search. But pre-approval doesn’t mean you’re guaranteed to get the loan. Lenders will continue to review your credit rating, income, and overall financial picture all the way through to closing day.
To stay qualified, you must maintain financial stability, avoid unnecessary risks, and keep your lender informed of any major changes.
Your credit rating is one of the first things lenders check when reviewing your mortgage loan application. A strong score can lead to better payment options, lower interest rates, and easier approval. However, even small mistakes during the loan process can cause your score to drop.
To protect your credit score:
Even after pre-approval, lenders may run another credit check right before closing. If your score drops or your debt increases, your loan could be delayed or denied.
A steady income is a key part of staying eligible for a home loan. Your lender will verify your employment and income multiple times before your loan is finalized. If you change jobs, reduce your hours, or take on a new form of self-employment, your loan may be reconsidered.
Be cautious about:
You’ll also need to show that your monthly payments for the home loan fit within your budget. Your debt-to-income ratio must stay within the lender’s requirements, typically below 43%. If your monthly debt increases due to a new car loan or credit card balance, you could disqualify yourself from the loan.
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Your down payment affects your loan amount and eligibility. If you use down payment assistance, those funds must be documented and approved by your lender. Any last-minute changes to your savings, gifts from relatives, or assistance programs must be fully disclosed.
Be sure to:
Some low down payment options, like FHA loans, are ideal for first time homebuyers, but they come with other requirements like mortgage insurance. It’s important to understand all the rules associated with the loan type you choose.
First time buyers often focus on the purchase price but forget about other costs like closing costs, home inspections, and insurance. These expenses must be paid upfront and can affect your final approval if you’re short on funds.
Lenders will check your bank accounts to confirm that you have enough money set aside for:
Avoid making large purchases or draining your savings for furniture or appliances before you finalize your homeownership.
One of the smartest steps a first time buyer can take is completing a homebuyer education class. These courses are often required for eligibility in payment assistance programs or low down payment options like FHA loans. But more than that, they teach you how to avoid costly mistakes that could disqualify you from your mortgage.
In a homebuyer education class, you’ll learn about:
Some lenders and down payment assistance programs require you to complete this class before you can access benefits. Even if it’s not required, it’s a helpful way to avoid surprises.
Find out more about home buyer education from Springboard.
After you’re pre-approved, it may be tempting to start spending. But adding new debt—even something small—can quickly cause your mortgage loan to fall through. Lenders are required to verify your finances again before closing, and any changes could make you ineligible.
To stay qualified:
Even if your income hasn’t changed, new loans increase your monthly payments and your debt-to-income ratio, which can trigger loan denial.
Lenders don’t just care about how much money you have—they also care where it comes from. Any large, unexplained cash deposits can be a red flag. If you’re using gift funds, down payment assistance, or funds from a refinance, those sources need to be clearly documented.
To protect your loan eligibility:
For first time homebuyers, staying organized with documentation is one of the best ways to avoid last-minute issues.
Even if you’re financially solid, problems with the property you’re buying can threaten your mortgage approval. A low appraisal, major home inspection issues, or unexpected fees can all affect your loan.
Lenders will not approve a loan amount greater than the appraised value of the home. If the home is appraised lower than your offer, you’ll need to either negotiate the purchase price down or pay the difference out of pocket.
Also, lenders may require you to complete repairs before closing if the home inspection reveals safety concerns or if the property doesn’t meet FHA standards (for FHA loans).
First time home buyers loan programs and payment assistance programs can be incredibly helpful, but they also come with strict rules. These may include:
If you’re using other programs (like Veterans Affairs or local housing grants), be aware that eligibility criteria can change. Be sure to keep in contact with your lender or housing counselor to make sure you still meet all the qualifications.
Your lender should be your go-to resource during the home buying process. If your financial situation changes—whether it’s a new job, a credit report change, or an unexpected cost—let your lender know right away.
Good communication with your lender helps you:
It’s much better to be upfront than to risk your entire home purchase falling through at the last minute.
Purchasing a home requires careful financial planning and vigilance throughout the loan process. By monitoring your credit, avoiding major financial changes, and communicating with your lender, you can secure your pre-qualification status and make your dream of homeownership a reality.
For help, speak with our certified housing counselors. Schedule your appointment today or call 800-431-8157 for free, confidential counseling.
