If you’re a first time home buyer in Connecticut — also known as the Nutmeg State and the Constitution State — there are many wonderful choices available to you. Its residential offerings include beautiful waterfront homes in Mystic, bucolic countryside retreats in Ridgefield and cool urban lofts in Hartford.
Due to being picturesque year-round and centrally located between New York City and Boston, real estate in Connecticut tends to be on the pricier side. Price, however, doesn’t have to be an obstacle to owning a home thanks to the many first time home buyer financing programs. No matter how much money you’ve saved to purchase a home, they’re worth learning about.
To expedite the process of becoming a homeowner in Connecticut, we’ve compiled the top 13 tips for first time home buyers in CT.
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.
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
The following first time home buyer CT programs are offered by the Connecticut Housing Finance Authority (CHFA):
|HFA Advantage and HFA Preferred Mortgage Programs||Helps first time home buyers in CT to obtain a loan with a below-market interest rate and to save on insurance costs|
|Downpayment Assistance Program (DAP) Loan||Helps first time home buyers in CT to make a down payment on a home.|
|These programs take an additional 0.125% off already below-market interest rates|| |
|Home of Your Own Mortgage Program||Helps those with disabilities to purchase their first home by providing mortgages at low interest rates and down payment assistance.|
|Homeownership for Residents of Public Housing||Offers below-market mortgage interest rate loans to qualified tenants of public housing.|
Tip 3: 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:
|FHA||A type of low down payment government loan insured by the Federal Housing Administration, a program office of the U.S. Department of Housing and Urban Development.|
• Low down payment
• Flexible credit review
• Fixed or adjustable rate
• Limited closing costs; seller can help pay closing costs
• No prepayment penalty
• Available to individuals with low credit scores or no credit history
• Special 203(k) program for home repairs
|USDA||A type of government loan insured by the U.S. Department of Agriculture’s Rural Housing Program that enables low- and moderate-income households to purchase property in eligible rural areas.|
• No down payment required
• Low mortgage rates
• 100% financing
• Reduced monthly mortgage insurance
• Closing costs can come from a gift
• Easy to qualify for
|VA||A loan provided by a private lender and guaranteed by the U.S. Department of Veterans’ Affairs in order to make homeownership more affordable for veterans.|
• No down payment
• No cash reserves
• No application fee
• No monthly mortgage insurance premiums
• Funding fee may be financed
• Seller can help pay closing costs
• Low interest rates
|Conventional||The most common type of loan, conventional mortgages are private-sector loans that follow the guidelines set by Fannie Mae and Freddie Mac. Borrowers can choose between 15-year, 20-year and 30-year mortgages.|
• Low down payment
• No upfront mortgage insurance
• Potential for lower mortgage insurance rates or no mortgage insurance at all
• More appealing to sellers
• Shorter underwriter approval process
|Jumbo (Non-Conforming)||Any mortgage that exceeds the conforming lending limit of Fannie Mae or Freddie Mac|
• Borrow more than a conventional or government-backed loan
• Potential for lower mortgage insurance rates or no mortgage insurance at all
Tip 4: 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 5: 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:
- 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.
- 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.
- 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.
- 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.
Tip 6: Get Pre-Qualified for a Mortgage
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
- Stock dividends
- Investment account statements
- Your debt-to-income ratio
Tip 7: 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.
Tip 8: 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 9: 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.
Tip 10: 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 11: Study Up on How to Make an Offer
You’ve found your ideal home in Connecticut. Now what?
- 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.
- Your real estate agent will write an offer letter and send it to the real estate agent representing the seller.
- 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.
Tip 12: 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 13: 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:
- 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.
- Purchase homeowner’s insurance. Lenders require you to buy homeowner’s insurance and bring the policy to the closing.
- 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.
- Meet all loan conditions. In order to close on your home, you must meet all of your lender’s conditions.
- Review the closing disclosure. The closing disclosure itemizes the closing costs to both you and the seller and outlines important loan information.
- 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.
- 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:
- Title search
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.