Top 14 Tips for First Time Home Buyers in Connecticut

The average home value in Connecticut as of February 2023 is $349,739, according to Zillow, up 8.5% over the past year. Nearly half of all sales, 46%, are over the list price.

In January 2023, Realtor.com announced that home prices were up nearly 5% compared to last year. On average, home sales were down 32% year over year, with 2,463 homes sold during the first month of 2023. That’s 3,613 fewer than the January prior. The median number of days a Connecticut home was on the market was 52 days.

To be considered a first time home buyer, you must be purchasing a home for the first time or just the first time in three years. This designation from theU.S. Department of Housing and Urban Development also includes:

• A single parent who has only purchased a home with a former spouse while married
• A displaced homemaker who has owned with a spouse
• An individual who has only owned a principal residence not permanently affixed to a permanent foundation.
• Someone who has owned a property not in compliance with local, state or model building codes and cannot bring it into compliance for less than the cost of constructing a permanent structure.

To expedite the process of becoming a homeowner in Connecticut, we’ve compiled the top tips for first time home buyers in CT.

Tip 1: Assemble a Real Estate Team
Tip 2: Look at Connecticut-Specific First Time Home Buyer Loan Options
Tip 3: Look at Connecticut’s City Specific First Time Home Buyer Loan Options
Tip 4: Review the National Loan Options Available to First Time Home Buyers in Connecticut
Tip 5: Know How Much Money You’ll Need to Put Down on a House
Tip 6: Apply for Real Estate Programs and Grants
Tip 7: Get Pre-Qualified
Tip 8: Don’t Confuse Being Pre-Qualified for a Mortgage with Being Approved
Tip 9: Make the Mortgage Application Process as Simple as Possible
Tip 10: Educate Yourself About PMI
Tip 11: Ask Yourself the Following Questions Before Beginning House Hunting
Tip 12: Study Up on How to Make an Offer
Tip 13: Get a Home Appraisal
Tip 14: Prepare for Closing on Your Home

Tip 1: Assemble a Real Estate Team

Ensure a smooth experience as a first time home buyer in CT by assembling a cracker jack team of experienced real estate experts. They will work together to help you find your ideal home, lock in the best mortgage rate and to close on your home.

Your real estate team should consist of the following real estate professionals:

Real Estate Agent: A caring real estate agent will work diligently to find homes that fit your budget, style and preference. They’ll ensure that you make smart choices and will serve as your advocate throughout purchase negotiations.

Mortgage Broker: Your mortgage broker will help you with the mortgage application process and to find a loan program that meets your needs. Look for one that is independent of any banks, since they’ll be able to offer a variety of mortgage products tailored to your specific needs, as well as more competitive rates and lower closing costs.

Lender: Most people don’t have enough money to make their down payment or to pay for their home in full. A lender can step in and loan you the money you need to purchase your home.

Accountant: An accountant who has experience with helping first time home buyers in CT can make you aware of how the home you want to buy will affect your finances.

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Home Inspector: A home inspection can uncover any issues that may be present with the home you wish to buy.

Real Estate Attorney: A real estate attorney will ensure everything is done correctly, that all the documents you’re signing are in your best interest and protect you in case something goes awry.

Tip 2: Look at Connecticut-Specific First Time Home Buyer Loan Options

In June 2022, Connecticut launched a new program called Time to Own, designed to help low- to moderate-income home buyers with down payments.

Eligibility hinges on the borrower’s financial needs, their ability to repay their mortgage obligations and their eligibility under the Connecticut Housing Finance Authority’s First-Time Homebuyer Program, which is open to new home buyers or those who have not owned a home in the last three years.

Visit the program’s website to learn if applications are currently being accepted.

The following first time home buyer CT programs are offered by the Connecticut Housing Finance Authority (CHFA):

Tip 3: Look at Connecticut’s City Specific First Time Home Buyer Loan Options

First time home buyer options can be unique to each city. Here’s what’s available in three of the state’s most prominent communities:

The City of Bridgeport has a complete guide intended to aid low- and moderate-income home buyers by offering a forgivable loan to cover down payment and closing costs to purchase one- to four-family homes. It’s administered by the Department of Housing and Community Development in partnership with non-profit community partners and lenders certified by the U.S. Department of Housing and Urban Development (HUD).

The Stamford HOME program in that city is run by the Housing Development Fund, Inc. (HDF). An interest-free loan of up to $20,000 can contribute to down payments and closing costs for first time home buyers in Connecticut. The loan must be repaid in full when the home is sold, refinanced or paid off in its entirety.

New Haven has its own assistance program for first time home buyers, focusing similarly on closing costs and down payments. Eligible participants can borrow up to 6% of the purchase price of a single-family home, capped at $10,000. A total of 20% is forgiven annually, with the entire amount forgiven after five years.

Tip 4: Review the National Loan Options Available to First Time Home Buyers in Connecticut

There are several national loan options — FHA, USDA, VA, Conventional, Jumbo — available to first time home buyers in CT:

Tip 5: Know How Much Money You’ll Need to Put Down on a House

If you qualify for a conventional loan, you’ll be able to put as little as 3% down to purchase a home in Connecticut. If you’re eligible for a VA or USDA loan, you may well not have to put any money down at all to purchase your home.

Tip 6: Apply for Real Estate Programs and Grants

As a first time home buyer in CT, would you like help making your down payment or paying your mortgage? If you answered “Yes” to either of those, you may be eligible to receive thousands of dollars in real estate grant money. As an added bonus, you may never have to pay the money back.

Federal real estate programs and grants include:

1. Down Payment Assistance (DPA) programs are intended for home buyers who can afford monthly payments, but don’t have the funds needed to meet the Federal Housing Administration’s 3.5% down payment requirement. They help home buyers with loans or grants that reduce the amount they need to save for a down payment. State, county or city governments run most DPA programs.
2. Fannie Mae’s HomePath ReadyBuyer Program provides participating home buyers with up to 3% closing cost assistance toward the purchase of a HomePath property. To be eligible, home buyers must successfully complete a simple online course.
3. If your family is low-to-moderate income, you may be able to purchase a vacant home that was foreclosed on for just $1.00 via the HUD Dollar Homes program. The idea is that homeowners who fix up homes and put them to good use, will serve as a catalyst for neighborhood revitalization.
4. The U.S. Department of Housing and Urban Development’s (HUD) Good Neighbor Next Door program provides qualified first time home buyers in Connecticut with a 50% discount off the list price of homes available in HUD’s inventory. The program, which is only available to law enforcement officers, firefighters, emergency medical technicians and teachers, is intended to help revitalize areas. Participants must commit to living in the home they buy for 36 months.

If you live in Connecticut and have any questions about buying your first home, contact one of our experienced mortgage brokers today.  

Tip 7: Get Pre-Qualified

Once you know which loan option is best suited for your needs, it’s a wise move to get pre-qualified. Getting pre-qualified for a mortgage enables you to find out the maximum amount you can borrow, which will help you set your price range. Also, getting pre-qualified gives you a competitive advantage over other buyers who might be interested in the same property as you.

To get pre-qualified for a mortgage, you’ll need to provide your mortgage broker with the following:

• Proof of income
  • Employee verification letter
  • Pay stubs from the past two months
  • IRS W-2 forms and tax returns from the past two years
• Your tri-merge credit report
• Proof of assets
  • Savings account
  • 401(k)
  • Stock dividends
  • Investment account statements
• Your debt-to-income ratio

Tip 8: Don’t Confuse Being Pre-Qualified for a Mortgage with Being Approved

Being pre-qualified for a mortgage is not the same as being approved for a mortgage. You’ll still have to secure funding by going through the standard mortgage application process. By serving as a liaison between you and lenders, your mortgage broker can expedite matters.

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Tip 9: Make the Mortgage Application Process as Simple as Possible

If, as a first time home buyer in CT, you aren’t pre-qualified for a mortgage, you have 90 days to apply for a mortgage after submitting your final offer on the home you wish to purchase.

The majority of people who apply for a mortgage find getting approved to be challenging. Working with a well-regarded mortgage broker can greatly increase your chances of receiving approval since they will expertly guide you through the mortgage application process and serve as the liaison between you and lenders. Although it’s possible to work directly with your bank to apply for a home loan, your mortgage broker will have access to a large network of lenders, which enables them to identify favorable mortgage terms for you.

The underwriter approval process is quite similar to the mortgage pre-qualification process. The underwriter will review your application to determine your ability to repay your debt based on multiple factors, including:

• Credit score
• Credit history
• Employment history
• Income stability
• Debt-to-income ratio and assets

The underwriter will either approve, deny or suspend your application based on their findings. If approved, your next step is to get a home appraisal. If suspended, the underwriter likely needs more information before they can proceed. If denied, don’t despair! The underwriter will explain why your application was rejected and, armed with this knowledge, you can work with your mortgage broker to resolve any issues and reapply.

Tip 10: Educate Yourself About PMI

Borrowers who make a down payment of 20% or less are required to pay private mortgage insurance (PMI). PMI protects the lender in the event that a borrower stops making loan payments. PMI is also required for government backed loans, such as FHA loans, as well as conventional loans.

LEARN HOW TO CALCULATE (& ELIMINATE) PMI

Tip 11: Ask Yourself the Following Questions Before Beginning House Hunting

To reduce the stress of becoming a first time home buyer in CT, consider the following prior to commencing hunting for a home:

• How much can you comfortably afford to spend on a home?
• What is your credit score?
• What type of home are you looking for? (e.g. a single-family home, a duplex, condo, townhome, a co-op, etc.)
• What features must your home have for you to be happy?
• What environment would you like to live in — urban, rural or near the ocean?

Tip 12: Study Up on How to Make an Offer

You’ve found your ideal home in Connecticut. Now what?

1. Decide what your offer will be with your real estate agent. Be sure to consider how long the house has been on the market and if it requires any obvious repairs or upgrades.
2. Your real estate agent will write an offer letter and send it to the real estate agent representing the seller.
3. The seller will respond by either accepting your offer, rejecting it, or making a counter offer; if the seller makes a counter offer, you can choose to accept it, decline it or counter back.

Once you have a signed offer, you’ll want schedule an official home inspection. The home inspector’s report will reveal any unseen issues that may lead you to withdraw your offer or to renegotiate it.

WHAT TO EXPECT WHEN APPLYING FOR A HOME MORTGAGE LOAN

Tip 13: Get a Home Appraisal

Even if you feel as though you’ve found your dream home, it could be overpriced or have hidden issues. This is why underwriters require a home appraisal from a lender-approved appraiser before they’ll provide final approval on your mortgage application. The home appraisal provides them with an objective idea of the home’s value and ensures you aren’t over-extending yourself financially.

The home appraiser will consider the following aspects regarding the house you wish to buy:

• Recent sales of similar properties
• Current market trends
• The general condition of the home
• Square footage
• The number of bedrooms and bathrooms
• Foundation type
• Home improvements, upgrades and added amenities
• Neighborhood characteristics
• Lot size
• Additional space (e.g. basement, attic, crawl space)
• Building materials

Once the appraisal is complete, the appraiser will submit their findings to the underwriter for final review and approval. If approved, your mortgage broker will work with the lender to lock in the most beneficial interest rate prior to closing.

Tip 14: Prepare for Closing on Your Home

The closing process transfers ownership of your new home from the seller to you.

During closing, your mortgage broker will work with you to review and sign all loan documentation.

To complete the closing, you’ll have to:

1. Choose a settlement company. They’ll coordinate document signing for both you and the seller and ensure you have both met the terms of the purchase agreement, pay out all funds, transfer the title and record the deed.
2. Purchase homeowner’s insurance. Lenders require you to buy homeowner’s insurance and bring the policy to the closing.
3. Obtain title insurance. When you purchase a home, you’re buying the “title” to the property, which gives you ownership of it. Title insurance offers protection in the unlikely event that someone pops up and makes a claim on your home.
4. Meet all loan conditions. In order to close on your home, you must meet all of your lender’s conditions.
5. Review the closing disclosure. The closing disclosure itemizes the closing costs to both you and the seller and outlines important loan information.
6. Do a walk-through of your home-to-be. The walk-through is a very quick look at your home. It will often take place on closing day.
7. Get the keys to your new home. The last step of the closing process is the legal transfer of the home from the seller to you, at which time you will receive the keys to your new home.

Keep in mind that you’ll be responsible for paying closing costs, which will likely include the following fees:

• Appraisal
• Origination
• Legal
• Title search
• Insurance
• Escrow

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Congratulations! You’re now officially a first time homeowner in Connecticut, a state renowned for its natural beauty, major business centers and for being home to the “Gilmore Girls.” If you have additional questions about becoming a first time home buyer in CT, contact our friendly and savvy first time home buyer team directly for more information.

There are plenty of first time home buyer resources to be utilized in Connecticut. Among them is the Connecticut Housing Finance Authority, offering 30-year, fixed rate mortgages with below-market interest rates to low- and moderate-income families and individuals. They spell out an 8-step process that begins with a homeowner education course and guides a potential buyer all the way to closing.

Capital for Change is another state/federal resource providing mortgage assistance to first time home buyers in particular.

Or maybe a Federal Housing Administration loan is right for you. Part of HUD, the administration insures the loan, allowing lenders to offer a better deal with low down payments, low closing costs and easier credit qualifying. Down payments can be as low as 3.5% of the purchase price.

Q: Should I take a home buying course?
A: First time home buyers in particular have benefited from courses that cater specifically to their unique, introductory needs. Many options are offered through the Connecticut Finance Housing Authority, where a complete schedule is online, featuring course titles like “Pre-Closing Home Buyer Education” and “Financial Fitness Counseling.”

Q: Should I opt for an FHA loan?
A: The Federal Housing Administration is the largest insurer of residential mortgages in the world, allowing borrowers to finance homes with lower down payments. They are especially popular with first-time homebuyers. Here are some guidelines:

• A credit score of at least 580 will allow for a 3.5% down payment
• MIP (Mortgage Insurance Premium ) is required
• Debt-to-Income Ratio must be less than 43%
• The home must be the borrower’s primary residence.
• Borrowers must have steady income and proof of employment

Q: Are there any state tax credits for me to utilize?
A: State officials have compiled a comprehensive list of assistance and programs available in Connecticut.