First-time Home Buyer Guide and Mortgages | HSBC

 

First-Time Home Buyer? We'll Help You Buy with Confidence.

First Time Home Buying represented by a couple deciding how to decorate their new home.

Buying your first home is exciting. As a trusted lender with knowledgeable mortgage consultants, HSBC can help you explore your options and make the process easier for you. Whatever your needs, we offer a variety of mortgage solutions at competitive rates to help you purchase your first home. Below you'll find information to consider in your home-buying decision.

How Much Home Can I Afford?

As a first-time home buyer, before deciding which house to buy, you first need to determine how much you can afford. Our mortgage calculator takes into account your income and monthly expenses to determine how much you can borrow.

Calculate how much you can afford

We have other comprehensive mortgage calculators to guide your mortgage decisions.

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Home Buying vs. Renting Advantages

Deciding between renting and owning is a decision that only you can make. Your individual financial situation, financial goals and your larger financial plan are all factors to take into account.

Home Buying

Home ownership has many advantages. Building equity in your home builds your personal wealth, and the value of your house may also increase over time. However, equity and increased property value are subject to market fluctuations. As a homeowner, you may qualify for certain income tax benefits and it's worth speaking to your tax advisor to see how that could affect your personal situation. Once your mortgage payments are complete, you own your house and personalizing your house fosters a sense of pride in the home you have created.

Renting

Renting offers both advantages and disadvantages. You have the flexibility to move easily, do not have to worry about housing market fluctuations, and home repairs are included in your rent. However, you are not paying towards home ownership and could be subject to sudden rent increases.

Who is involved in the Home Buying Process?

Many key people are involved in the home buying process when you purchase your home.

Your Real Estate Agent

It all starts with your real estate agent. Often, the best way to find an agent is through word of mouth. Ask your family or friends who have purchased a property recently for the name of their real estate agent. An experienced professional will start with your wants and needs and recommend a property. Real estate agents will help with negotiations and paperwork if you are buying a condo or co-op. Plus, when buying a home, you have the added benefit that your agent's commission is typically paid by the seller, not you.

Home Inspector

One of the important stages in the process is the home inspection – don't neglect to do this. Once you have chosen your new house, the next step is to find a qualified inspector. While home inspection is mandatory for few types of mortgages, it is recommended to be done even if it is not part of the requirement. It may provide you with some beneficial information about the home you are purchasing. Keep in mind that the inspection is different from an appraisal which is an evaluation of the home by a lender.

The American Society of Home Inspectors is an organization that has a set of standards that its members must follow. The Society can provide you with a list of qualified inspectors in your area. This is just one source you can use to help find a qualified inspector in your area. However, HSBC does not have a relationship with The American Society of Home Inspectors or the inspectors listed. Ask for references and contact those references before hiring an inspector. Agree on a fee before the inspection, and require a full written report. Be aware that most reports have clauses designed to protect the inspector from liability if he or she overlooks a problem in the home.

The purpose of the inspection is to give you an evaluation of the mechanical and structural condition of the home. The inspection should include an evaluation of the following:

  • Major systems (heating, air conditioning, plumbing and electrical)
  • Foundation
  • Roof
  • Windows and doors
  • Floors, walls and ceilings, etc.

If the report shows substantial problems with the home and you are still interested in buying, you may be able to either negotiate a lower price with the seller or have the seller fix the problems.

Real Estate Attorneys

While not legally required in most states, having a legal professional represent you is a good option. Make sure the attorney you choose specializes in Real Estate transactions. Your attorney will help you understand your legal rights on a Contract of Sale and negotiate terms such as a Mortgage Contingency for situations like inability to get financing, get your down payment back, or get the seller to fix certain items prior to closing.

Closing agent

Aside from the certified checks and proof of insurance, the closing agent or attorney will represent your interests and ensure that you understand your contract and your mortgage.

Down Payment and Costs to Consider

Down Payment

The down payment is part of the purchase price of a property that the buyer pays, and is not included in the loan amount.

Closing Costs

Here are some of the common closing costs you might need to pay:

  1. Mortgage lender's Fees
    • Loan origination fee
    • Commitment fee
    • Loan discount points (if applicable)
    • Appraisal fee
    • Credit report fee
  2. Prepayments
    • Interest from the date of the closing to the date of the first monthly payment
    • Mortgage Insurance Premium (if applicable)
    • Flood Insurance Premium (if applicable)
    • Hazard Insurance Premium (or receipt of payment)
    • Prorated Property Taxes
  3. Additional Fees
    • Title charges
    • Recording and transfer fees
    • Attorney fees
    • Termite inspection, professional home inspection and survey fees (if applicable)

Applying for Your First Mortgage

Experiencing the mortgage application process for the first time can seem a bit daunting, but as long as you're prepared with the right documents, our process will guide you smoothly through the front door of your new home. We can help prepare you with advice and checklists that will keep you organized.

There are three main steps during the mortgage loan process: application, evaluation (or underwriting) and closing.

Application

If you are applying for a Home Loan, you will complete the loan application and pay an origination fee, if required.

Learn more on the Loan Process
Review the documents that are required to complete the mortgage application
Evaluation

HSBC mortgage specialists will help you through the application process and make sure your application is complete. They determine if you qualify for a mortgage, perform quality control checks and prepare your loan for closing.

The decision to grant a mortgage includes factors such as your income-to-expense ratios, credit history, assets, appraised value of the home, and other information. Don't be discouraged if your application does not meet all of the standards. Underwriters are trained in weighing compensating factors.

Lenders have a method of determining if you qualify for a mortgage. A certain percentage of your total gross monthly income (your income before taxes) is allowed to pay for your total housing debt. These percentages are often referred to as ratios.

Your housing debt consists of the cost of principal and interest to repay the mortgage loan, the real estate taxes, mortgage insurance (MI), flood insurance if required, homeowner's insurance, and home owner association fees, or other household related expenses as they may apply. This is also known as PITI - Principal, Interest, Taxes and Insurance.

The lender allows you to apply a certain percentage of your total gross monthly income for total debts. There is a limit to the amount of gross income that you can apply to these total debts, which are also known as recurring debts. A recurring debt is any payment you make on an ongoing basis and includes all loans (even loans in deferment), credit card payments, installment loans, auto loans, education loans, alimony, and other types of debt. Generally, your total monthly recurring debt plus total monthly housing debt can be no more than 43% of your total gross monthly income for most mortgage loans. This percentage is known as your debt-to-income ratio.

The lender evaluates your application and supporting documentation and makes a decision on the loan. If your loan is approved, the lender may issue a commitment or approval letter. This letter provides the details of the transaction, including the mortgage amount, interest rate, points, and other important information along with conditions that will need to be satisfied to obtain the loan.

If the loan is not approved, the lender provides a written explanation for not approving the loan, and you can begin corrective steps. The lender may also offer you a lower loan amount, changed terms, or changed product, which is called a counteroffer.

Closing

The closing, or settlement, is the final step in legally transferring home ownership from the seller to the buyer.

Either at a scheduled meeting or through an escrow agent, this step includes the lender sending funds to the attorney or closing agent and you signing the closing documents. The seller is then paid and you receive the title to the home.

Consulting a real estate attorney is in your best interest to avoid any unnecessary confusion during closing.


Take Advantage of HSBC's First Home Club

We are proud to offer the First Home Club matched savings program. With this program, you may qualify to receive grant funds of up to $7,500 towards the down payment and closing costs. Here's how it works:

Financed by the Federal Home Loan Bank of New York, this special savings program will match $4 for every $1 you save, up to $1,875. Available for prospective qualified home buyers in New Jersey and New York State, this program offers significant help towards realizing your dream of home ownership.

Highlights of the home buyers program
  • First-time home buyer - A first-time buyer is defined as anyone who has not owned a home for three (3) years. Single parents and displaced homemakers who owned or resided in a home with a spouse during the last three years are also first-time home buyers.
  • Length of the plan - The length of the savings plan runs from 10 to 24 months.
  • Income limits* - To qualify, your annual household income must be at or below the Mortgage Revenue Bond income limit in the County where you currently reside.
  • Mortgage application - As a participating First Home Club lender, HSBC will help you open your savings account and provide assistance in the mortgage application process.
  • Home Buyer Education - You must complete a home-buyer education course from an HSBC-approved counseling provider before the mortgage commitment expires. This program assists first-time home buyers in the areas of financial planning, monthly budgeting, the home buying process and other related topics.
Apply for the First Home Club
  • By Phone - 888.313.7247
  • By E-mail - HSBC.Grants@us.hsbc.com
Download additional information on First Home Club program*

Choosing the Right Mortgage for You

As a first-time home buyer, looking for an affordable, flexible mortgage can be a challenging process. We offer different types of mortgages to best suit your needs.

Compare Mortgages

Mortgage and home equity products are offered in the U.S. by HSBC Bank USA, N.A.. Subject to credit approval. Borrowers must meet program qualifications. Programs are subject to change. Geographic and other restrictions may apply. Discounts can be cancelled or are subject to change at anytime and cannot be combined with any other offer or discount.

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