This document provides information to first-time home buyers on improving credit scores, determining home affordability, and the steps to purchase a home. It discusses how credit scores are used to determine loan eligibility and interest rates. It then provides 13 tips for improving credit scores, such as making on-time payments, keeping credit utilization low, and disputing any errors on credit reports. Next, it stresses the importance of only purchasing a home that is affordable, and suggests keeping total debt-to-income ratio below 43%. Finally, it outlines the 10 typical steps in the home buying process, from getting pre-qualified to negotiating an offer.

1. 1
First Time
Home Buyer
Buy a New Home in Maryland
1920 Greenspring Dr.
Timonium, MD 21093
443-531-9715
www.marylandnewhomepurchase.com
Guide
Book

2. 2
Table of
Contents
2 Credit Scores
9 Home Affordability
10 Steps to Buying a Home
11 Loan Types
15 Down Payment Help
16 FAQ’s from Home Buyers

3. 3
Credit Scores
Credit scores are an important factor for poten al home buyers. Credit scores
are used to determine both purchase loan eligibility and interest rate. The high-
er the credit score the higher the chance for loan approval and a lower overall
interest rate.
Are you trying to make a major purchase and are in need of improving your cred-
it score to do so? Our team of licensed Realtors and Loan Officers have decades
of experience helping people to repair their credit with the three major credit
bureaus. Here are 13 credit repair ps that we have uncovered in our years of as-
sis ng others to improve their credit scores in order to get qualified to buy a
home. These are all tried and proven methods for ge ng your credit scores up.
1- Your payment history to creditors that report to the credit bureaus ac-
count for about 35% of your given credit scores. This is the most important part
of star ng to repair your credit. Make NO 30 day late payments to those credi-
tors. This will begin to have a great impact on your credit score. If you have a bill
due in a given month make sure that payment posts before the end of the
month.
2- Seriously consider se ng up auto payments to your creditors through a
checking account or debit card to assure that there will be no future 30 day late
payments.

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3- Account balances account for about 30% of your given credit scores. If you
want to improve your credit score keep the balances owed on your credit card
at about 30% or lower than your available credit limits. If you have a credit
card with a $1,000 credit limit keep the balance at $333 or lower for example.
4- Establishing and then keeping accounts open accounts for about 15% of
your given credit scores. Keep old accounts in good standing open. The older
that your credit accounts are the be er that they are for your credit.
5- Establish different types of credit. This accounts for about 10% of your given
credit scores. It is great to have revolving accounts and these help your credit
significantly when managed well. However, establishing installment loans along
with your revolving accounts demonstrates the ability to manage different
types of credit.
6- Do not take on more than you can reasonably manage to pay. All you really
need is 3-4 accounts repor ng on your credit that you are managing well. Ex-
cessive credit too fast can have a nega ve effect on your credit scores. This ac-
counts for about 10% of your given credit scores.

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7- Open new trade lines. Credit cards are a great tool for improving your credit
when they are managed correctly. There are several types of credit cards. Re-
tail store credit cards, bank credit cards, secured credit cards. Applying for and
being approved for 2 or 3 credit cards is a BIG step toward ge ng your credit
scores up. If you do not have the best credit and know it, do not apply for cred-
it cards designed for people with good credit. CapOne, First Premier (secured
credit card), JC Penny are easier cards to get if you have challenged credit. Fin-
gerhut reports payments to the credit bureaus and these accounts can help
your credit too. We do not endorse nor make any expressed guarantees that
you will be approved. But these are a good place to start if your credit is not
the best. Applying for an auto loan, being approved, paying all payments on
me, will also improve your credit scores.
8- Being added as an authorized user on someone else's credit card whom is
managing their card correctly can also improve your credit scores. The older
the card and the higher the credit limit the more it will improve your credit
scores. By being added as an authorized user that account would then begin
repor ng on your credit report each month. Of course you would only want to
consider doing this with someone who pays their card on me each month. If
they do not then that card would have a nega ve impact on your credit scores.

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9- Increasing your credit card limits can also help improve your credit scores.
A er six months of on me payments credit card companies will o en approve
a credit limit increase. Doing this while maintaining a low balance will have a
posi ve effect on your credit scores. It signals that you have available credit yet
are not in need of using it.
10- Get current on any repor ng late payments and stay current. Credit reports
only report payments that are late 30 days or more. If you have a 30+ days late
report on your credit that will con nue to report un l you bring it current. This
will kill your credit score. For example, if you did not make a payment in May
on your credit card or card or car payment and then make a payment in June.
You have just made May's payment and June is s ll due. If you do not make an-
other payment un l July then you have what's called a running 30 day late pay-
ment. This will have an even worse affect on your credit scores.

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11- Se le collec on accounts and charge offs. The goal is to have all your past
due accounts marked paid, current, or se led. When it comes to mortgage
loans the extent to which this must be done varies. Contact us for more details.
Some debts do not necessarily have to be paid off to qualify for a mortgage
loan. Se ling these accounts will improve your credit scores. Collec on that
are 180 days late or more usually go into charge off status. This has a worse im-
pact on your credit then a collec on does. If you have collec ons try and re-
solve them before they go to charge off. You can usually nego ate the debt
with the creditor and o en offer a lower agreeable se lement offer. If you
se le a debt make sure to get a le er from the creditor or collec on company
sta ng that your account has been se led with a 0 balance. You will need that
le er to get that nega ve account off of your credit report. The older the
charge off is the lesser affect it has on your credit scores. Do not a empt to
se le these accounts if it will cause you to become late on your accounts in
good standing. It is cri cal that you keep your current accounts paid on me.
12- Remove old delinquent accounts that have reached 7 years since their re-
por ng date on credit. Old delinquent accounts greater than 7 years old can
usually be removed at your request to the credit bureaus. Removing these will
improve your credit scores.

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13- Review your credit report and work to fix errors found on it. Errors do hap-
pen on credit reports. A er review of your report inaccuracies can be disputed
with the 3 major credit bureaus. Just keep in mind that the credit bureaus will
personally contact the creditors involved and find out their side of the story.
Disputes that are not answered within 30-45 days which happens some mes
but not o en will be removed from your credit report. However, if the creditor
s cks by the reported debt then the credit bureau will note that on your credit
and the debt will remain. You will then have to back up your dispute with proof
that the debt is reported inaccurately. Some credit repair companies promise
to improve your credit and what they do is simply write the credit bureaus a
dispute le er for all your nega ve collec ons and charge offs hoping that the
creditor does not reply. However, usually they do. If you are trying to buy a
home your credit report cannot have any unresolved disputes on it. Keep this
in mind if you choose to dispute an account have proof to back it up. If not,
then any temporary increase in your credit score will be lost when the lender
forces you to remove unresolved disputes from your credit report.
Source: Credit Repair Tips

9. 9
Home Affordability
Considering the major housing bust that the economy is s ll a emp ng
to recover from it is cri cal that home buyers seriously consider the
affordability of a home purchase for them.
Buying a home is an exci ng experience, a great accomplishment. For
many it is in fact the fulfillment of the American dream. That dream can
become a nightmare if you do not buy within your means.
As you consider purchasing a home be careful not to bite off more of a
mortgage payment than you can easily afford. Because at the end of the
day that is what you own in the beginning a mortgage payment. The
house belongs to the bank if you do not keep up with your payments.
You may be told by your lender that you qualify for a very large home
loan. That does not mean that you should shop in that price range. Most
Financial Advisors suggest that you do not go over a total debt to income
ra o of 43. Your lender can tell you what your debt ra o is for any given
loan amount. Shop within a reasonable total debt to income ra on. If
the 350,000 purchase price that you may qualify for puts you over a com-
fortable debt to income ra on then maybe you should be shopping for a
home below 300,000. Be prac cal do not fall in love with a home that
you will struggle hard to pay for. You do not know what emergency finan-
cial situa ons may loom in the future.
It is also advised that you should try and have a savings a er the pur-
chase equivalent to 6 full months of your normal monthly debts before
going into a home purchase.

10. 10
Steps to Buying a Home
1-Contact a Mortgage Lender to get a credit and affordability analysis.
2-Get a pre-qual le er from the Lender. This is necessary in order to get a
real estate agent to represent you and make an offer on a house.
3-Connect with a Realtor to assist you with finding the type home you
are interested in buying.
4-Search un l you find the right home. Decide what areas you would be
interested in buying a home in. Consider the crime, schools, property tax,
and likely apprecia on of the areas.
5-Make an offer on a house. Your Realtor will draw up the purchase offer
for you.
6-Nego ate and agree on all terms between you and the seller. Nego -
ate the price, seller's closing cost assistance, and whether items in the
home will be le behind.
7-Arrange for the home inspec on and appraisal. The lender will order
the appraisal for you.
8-Provide all necessary documents requested by your lender so you will
get the official loan approval and clear to close.
9-Go to the se lement table, sign all final purchase documents,and close
on the home.
10-Get the keys to the house and move in.
Source: Steps to Buying a Home

11. 11
Loan Types
When a emp ng to buy a home an individual should learn about all
available loans that there are to do so. There are many different loan
programs available to buy a home and each has it’s plus and minuses. By
evalua ng each of these loan programs you will be able to find the loan
program that best fits your unique situa on.
Coven onal Loans: Conven onal loans are a great op on for financing a
new home purchase. Conven onal loans extend up to 97% financing op-
portuni es for home buyers. There are however some banking ins tu-
ons and credit unions that will go 100% financing on a conven onal
loan. However, with enrollment in one of the down payment assistance
programs available it could cover much of any necessary down payment.
Conven onal 1st me home buyer loans approval guidelines are a li le
more restric ve than other loan programs. With conven onal loans their
is no upfront funding fees like USDA, VA, FHA Loans. Although these up-
front fess can be financed into the home purchase they nonetheless are
being paid for by the home buyer. With Conven onal loans the monthly
mortgage premium can be avoided with a 20% down payment on a
home. If you choose conven onal financing but do not put 20% down
there will be a mortgage insurance. However, that mortgage insurance
premium can be requested removed once the home buyer reaches a
80% LTV. Once the loan balance equals only 80% of the homes appraised
value it can be removed.

12. 12
Veteran Loans (VA): Veteran Administra on loans are a great op on for
financing a new home purchase for Veterans. Veteran home loans extend
1OO% financing opportuni es for Veteran home buyers. Veterans
affairs home buyer loans are by far the one of the best new home pur-
chase program available. To qualify for a Veterans Home Purchase Loan,
you must be an ac ve or honorably discharged veteran of the armed
forces. You must apply for a Cer ficate of eligibility, which our team can
help you do. Veteran loans do have an upfront fee which can be substan-
al. That upfront funding fee can be avoided only if the Veteran has an
service related disability percentage of 25% or more.
Benefits of a VA home loan, includes;
Low&Affordable fixed interest rates
No monthly mortgage insurance
0 down payment.
Large loan limits
Gi funds and grant funds accepted
Seller concessions are allowed
Eligible proper es include new construc on, exis ng homes, manufac-
tured homes, condos, PUD's, and new manufactured homes

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FHA Loans: FHA first me home buyer programs are a great op on for
financing a new home purchase. FHA loans extend 96.5% financing op-
portuni es for home buyers. However, with enrollment in one of
the down payment assistance programs available it usually covers much
of the necessary down payment. FHA 1st me home buyer loans are the
easiest of all purchase loans to qualify for. The credit score and income
requirements for FHA loans are less restric ve than any other first me
home buyer loan program. The FHA has a 203K Loan op on which is a re-
hab loan that can provide up to $30,000 in home improvements on your
new home purchase. FHA Loans have both upfront funding fees and life-
me monthly mortgage insurance.
Some of the reasons why an FHA loan in Maryland is a great choice, in-
cludes;
Low&Affordable fixed interest rates
Only a 3.5% down payment.
Large loan limits
Gi funds and grant funds accepted
Down payment assistance programs allowed
Seller concessions are allowed
Eligible proper es include new construc on, exis ng homes, manufac-
tured homes, condos that are FHA approved, PUD's, and new manufac-
tured homes

14. 14
USDA Loans: USDA loans are a great op on for financing a new home
purchase. USDA loans extend 100% financing opportuni es for home
buyers. USDA Loan programs were started to encourage development
in rural areas of the USA. The USDA loan assists low to moderate income
families in achieving their homeownership dreams. To qualify, the bor-
rower must meet USDA minimum income and credit score standards,
and purchase a home in one of the USDA eligible rural areas in their
state. USDA Loans so have an upfront funding fee and a life me monthly
mortgage insurance.
Some of the reasons why a USDA loan is a great choice, includes;
Lower mortgage insurance premiums than FHA
Affordable fixed interest rates
0 down payment.
No maximum purchase price
Gi funds and grant funds accepted
Seller concessions are allowed
Eligible proper es include new construc on, exis ng homes, manufac-
tured homes, condos, PUD's, and new manufactured homes
Not limited to first me home buyers.

15. 15
There are various down payment assistance programs for first me home
buyers in the US. There are also some forgivable grants for down pay-
ment assistance and closing costs for first me home buyers in various
states in the US. One of the biggest obstacles to home-ownership
is coming up with a required down payment. Down payment assistance
programs and grants help many achieve their home-ownership dreams
that otherwise would not. State or Local County Employees may be eligi-
ble for addi onal down payment assistance.
Not every first me home buyer qualifies for down payment assistance
or grants. There are statewide down payment assistance programs and
there are some mes county or city specific programs within states. Here
is a great resource if you are looking to apply for a down payment assis-
tance program within you state. h p://downpaymentresource.com/are-
you-eligible/
Down Payment Help

16. 16
How much money will I need to buy a home?
The overall money that will be needed by a person to buy a home depends upon several factors.
There are basically three separate categories of costs that a home buyer is expected to pay for in
some way.
First off there is the down payment. The down payment could be up to 10% of the purchase
price. This depends upon what loan they are offered or qualify for. VA and USDA Loans offer
100% financing, elimina ng the need for a down payment. FHA Loans for first me home buyers
require 3.5% down. Conven onal loans usually require 10% down. However, there are many
down payment assistance programs that are available that can reduce or eliminate the down
payment cost to the home buyer.
Secondly, there is the buyer's por on of closing costs that must be paid. Title fees, state taxes,
stamps, tle fees, home owner's insurance, etc. These fees, although they are the buyers, can be
covered by a nego ated closing cost percentage agreed to by the seller. Generally up to a 6%
seller's assistance is allowed with most loan types. If enough seller's contribu on is nego ated as
part of the purchase contract, generally most or all of the buyer's por on of closing cost fees can
be covered.
Lastly, there is the cost of the appraisal, op onal home inspec on, termite inspec on. These ser-
vices if chosen or necessary, must be paid in advance of loan se lement. If the home buyer
chooses an experienced lender with first me home buyer programs, down payment assistance
programs, they can o en buy their home with very li le out of pocket costs.
FAQ from Home Buyers

17. 17
Do I really need to use a Real Estate Agent as home buyer?
Buyers do not have to use a Real Estate Agent of their own to buy a
home. However, here is a list of good reasons to hire one.
1-A real estate buyer's agent represents the home buyer's interest while the home
seller's realtor is trying to get the best deal for the seller.
2-The buyer's agent is paid from the real estate fees charged to the home seller.
Buyer's do not pay anything for the services of their realtor.
3-A buyer's real estate agent can assist the home buyer with finding the type home
they are looking for.
4-The buyer's agent will help a home buyer get a fair price on a house, nego a ng
with the seller's realtor in behalf of the home buyer.
5-The buyer's realtor will prepare the necessary purchase contract that gets pre-
sented to the home seller by their realtor.
6-The buyer's realtor will set up appointments for the home buyer, accompanying
them in seeing the home's they are poten ally interested in purchasing.
7-The buyer's realtor offers their experience and advice about the home buying
process to the client.
FAQ from Home Buyers

18. 18
What is private mortgage insurance (PMI)?
Private mortgage insurance o en referred to as PMI, is an insurance policy that pro-
tects the lender in the case of a borrower defaul ng on their loan. The home buyer
pays the annual premium in 12 equally divided payments added to the mortgage
payment. The lender is the beneficiary of the policy.
PMI is required on all FHA and USDA Loans. At one me PMI insurance ended on
FHA loans once the borrower's loan to value reached 80%. That policy has changed.
FHA PMI remains for the life of the loan with FHA Loans except for home buy-
er's that take out a 15 year loan when they buy their home. In this case, once the
loan to value reaches 78% the home buyer can request the PMI to be removed.
USDA Loan PMI remains for the life of the loan. However, the PMI insurance is only
about 1/3 the cost of FHA and Conven onal Loan PMI. VA Loans have no PMI insur-
ance requirement. Conven onal Loan PMI can be removed once the loan to value
reaches 80%.
FAQ from Home Buyers

19. 19
Should I get a home inspec on?
If you are thinking about buying a home one of the decision you will face is whether
or not you should get a home inspec on done on the house you are interested in
buying.
Home inspec ons are not actually required in order to buy a home. Unless you are
applying for a down payment assistance program and that program requires one.
Although home inspec ons may not be required they are generally suggested by
realtors and lenders as a precau on against buying a home that has serious issues
that cannot be easily seen. So although maybe not required, a home inspec on is
worth the extra cost to assure you are buying a sound home.
Home inspectors will do a complete inspec on of the home, including;
Plumbing
Roofing
Siding
Electrical
Founda on
Gu ers and Downspouts
Furnace
Insula on
FAQ from Home Buyers