First-Time Homeownership: The Ultimate Guide for Idaho Residents from Boise and Beyond

Embarking on the journey of first-time homeownership is a significant milestone, especially in the picturesque state of Idaho. From the bustling streets of Boise to the serene landscapes beyond, there are plenty of places that many feel lucky to call home. To expand this opportunity to everyone, we’ve made this guide to help others navigate the complex process of buying a house in Idaho. We’ll dive deeper into the requirements, your different mortgage options, and different assistance programs that may be available to Idaho residents.

The Basics: Understanding First-Time Home Ownership in Idaho

Before first-time owners proceed in the home-buying process, they must understand the term “first-time home buyer.” Sometimes, you’ll have more lending options available as a first-time home buyer, as several government programs and lending grants can assist people who cannot afford housing through traditional lending options.

What Are the Requirements for First-Time Home Buyers in Idaho?

As the name implies, you must not have owned a primary residence within the last three years to be qualified as a first-time home buyer. However, there are exceptions. For example, if you’ve only owned a house with a spouse, you may be qualified as a first-time buyer if you are displaced and seeking homeownership afterward.

You must also reach these benchmarks:

Be under income limits that pertain to specific programs, which can be 80% AMI for the area you will be living in;
Have a credit score of at least 620;
Have debt-to-income requirements which can vary from 38% to 45%.

Specific first-time buying programs may have additional requirements, which is why taking homebuyer education courses is so important. For example, a USDA first-time buyer loan may only be available if you plan on buying a property in a rural area.

What Is a Good Credit Score for First-Time Home Buyers?

To obtain a loan, you must meet minimum credit score requirements. A credit score is based on your financial history, and it factors in any debts you may have and how reliably you pay off these debts and other bills. It often indicates to lenders that you are a responsible recipient and will eventually be able to pay back future loans. In their eyes, a high credit score shows lenders you are a trustworthy investment.

The actual credit score requirements may differ depending on the lender and the type of loan you’re seeking. For instance, the average homeowner’s credit score was 768 in 2022. Conventional loans will typically need a credit score of 660 or higher; government loads (like FHA) may require a score of at least 620. This ultimately helps first-time buyers who may not have enough credit history to qualify for a traditional loan.

If you’re trying to raise your credit score, follow these steps:

Check your credit score: You can check your credit score with your credit union or bank or sign up for a free annual review at annualcreditreport.com.

Build credit history: If you’ve never had a credit card or never taken out a loan and paid it off, you likely have a low credit score due to minimal history. Once you build your history by getting a credit card or paying off loans responsibly, your score will rise with time.

Pay your loans and bills on time: Whether you have a payment for a credit card, rental housing, a car loan, or a student loan, you must pay them on time. Otherwise, your credit score will decrease. Many loan services will establish a payment plan or direct deposit to ensure you can pay your loan on time regularly.
Don’t reach your credit limit: Even if you have a smaller credit card with a minimal credit limit. Keep your balance below 30% of your credit limit.

Following these steps can mark a significant milestone in getting your first house.

Assessing Your Finances

Beyond your credit score, you must also evaluate your financial situation to afford your mortgage monthly. You don’t want to take out a mortgage if you can’t reasonably live within the tight budgetary restraints it may create. For instance, many lenders may reasonably approve a higher loan amount as long as you pay a higher monthly mortgage payment. Don’t agree to these payments if you know it will be a hardship for you.

An online mortgage calculator can often help you determine whether you can afford a house based on your income and debts. This is often the first step in evaluating your financial situation. You can also meet with a financial advisor or take pre-purchase coaching classes to evaluate your financial situation, advise you on budgeting and credit repair, and estimate what you can reasonably afford.

In this coaching, you will also evaluate costs in addition to a mortgage, such as taxes, utilities, maintenance fees, home insurance, and homeownership fees. If you’re living paycheck to paycheck to pay your mortgage, you won’t be able to pay for essential repairs (plumbing, appliances, etc.).

Navigating the Home Buying Process in Idaho

When seeking advice about buying a house, people may give you vague answers when you only need a tangible place to start. Let’s examine some of the first steps you’ll take to buy a house.

Choosing the Right Location for Homeownership

Idaho has plenty of options and locations for first-time buyers compared to other states. Your choice of a home and its subsequent lending mortgage options will depend on where you would like to live and where you work in Idaho. Although certain bustling areas like Boise are more expensive than rural areas, you should base your decision on your desired location on your personal preferences for your commute, your hobbies, the community itself, and other aspects of your lifestyle.

If you want to live in a tight-knit small town, consider towns like Cascade or Idaho City. If you want to live in an up-and-coming area with access to more urban amenities, consider pocket neighborhoods in the Treasure Valley.

You should also consider your preferences for the neighborhood itself. For example, would you like to live in a particular school district for your kids’ education? You should also consider the safety ratings in your neighborhood, which include the total number of crimes within the community and the percentage of violent and property crimes. With this knowledge, you can make the best decision for you and your family.

During your research, don’t discredit non-established or newer neighborhoods in less-known areas of Idaho. Homes in these areas will most likely increase in value as the community becomes more established and more amenities become available, drawing in demand from other potential buyers. These areas are also tighter-knit since they’re smaller communities, which can be great if you have a family or are a new homebuyer looking to build roots.

How To Afford a House in Idaho

The first step to affording a house is establishing it as a goal. From here, you can devise a savings and budgeting plan to save enough money for a down payment and then account for a budget with a mortgage. Consider the following tips to save money and budget:

Estimate your monthly income and expenses: This will involve estimating your household income and expenses — establish “needs” vs. “wants”.

Create your budget and eliminate unnecessary expenses: Once you’ve calculated your income and expenses, you can identify areas where you can cut back. You should first budget for all necessary expenses, such as loan payments, rent, utilities, and food. From there, you can sacrifice wants like “entertainment” or “fun” expenses in favor of saving for a down payment.

Communicate with your household: Once you establish a budget, you should make sure other household members know the budget to stick to. As long as everyone has the same goal, saving will be easier.

Set up automatic transfers and payments: You can always set up an automatic transfer from your checking to your savings account so you don’t have to worry about transferring money monthly. Additionally, if you have any existing loans, many will allow you to set up instant payments to reduce your accruing interest, which can help your debt-to-income ratio.

Ultimately, budgeting and saving will take time. If saving takes longer than expected to buy a home for yourself, consider co-owning a house with a close friend, family member, or loved one. This option can be great if you and the other person are close, share similar goals and habits, and establish grounded expectations about your mortgage payments.

Alternatively, you could always “house hack,” where you could buy a house and rent out any spare rooms to pay your mortgage.

Getting Preapproved for a House

Once you have enough money for a down payment and a steady record of following your budget, you can seek preapproval for a home loan. This differs from pre-qualification, which lenders may use as the initial step in qualifying for a home loan. At this stage, lenders don’t create any formal documentation, so there is no definitive proof that you can place an offer on a house to sellers and real estate agents.

However, preapproval shows real estate agents and sellers that you have done the necessary steps — you have the income and have met with a lender who will confidently loan you money for a home. To gain pre-approval, you must provide your latest W-2, a current pay stub, proof of other loans you may have, and a list of your assets.

From here, the lender will calculate whether you meet the lending requirements and create a letter that states the type of loan and the total amount they’re willing to give.

What Kind of Mortgage Should You Get?

Once you’ve reached out to a lender, they can help determine which types of loans that work best for your budget and overall situation, including:

Federal Housing Administration (FHA) loan: As part of the U.S. Department of Housing and Urban Development (HUD), the FHA created loans to open up loaning opportunities to people who may not be able to afford as large of a down payment and have a lower credit score. You may only need to pay up to 3.5% of the total cost of the house as a down payment. However, you must also pay mortgage insurance, which protects the lenders if you default, pass away, or can’t meet their agreements.

VA loans: If you are a veteran, you also have the opportunity to use a VA loan as long as you qualify. To gain a VA loan, you must request it through the VA, which will give you a certificate of eligibility for your mortgage lender. From here, you don’t have to worry about down payments.

USDA loans: For this loan, you need only a 640 credit score, but you won’t have a down payment. However, this loan covers properties in rural areas.

Conventional loans: This is a term for loans obtained from Fannie Mae and Freddie Mac, including HFA Advantage or HFA Preferred loans. With these loans, your down payment can be 3% of the total mortgage. However, conventional loans have stricter requirements: You must complete a homebuyer education course and must typically have a credit score of at least 620.

Each loan differs in fixed and adjustable mortgage rates. For example, in fixed-rate mortgages, the mortgage will have the same interest rate the entire time. Adjustable rates can fluctuate.. This latter option may be good if you plan to keep the loan for a limited time and can afford an increase in interest rates.

No matter what loan you look at, you should also consider the monthly mortgage payments for each one. For example, some loan programs may not require a down payment but will have a higher monthly payment than a traditional loan. So, make sure this option fits your budget before deciding.

How to Navigate First-Time Homebuyer Assistance and Programs in Idaho

Beyond the loan assistance programs mentioned above, there are also state-wide homebuyer assistance programs and tax credits to make homeownership more accessible, including:

Home$tart: This program offers down payment assistance as a forgivable loan, as long as they meet income limits and take a homebuyer education class. However, the program won't forgive your loan if you don’t live in the home you buy for at least five years. This is only available to specific lenders.
Homeownership Opportunity Program (HOP): This Boise program offers financial assistance for closing costs or down payment if your household income is 50% of the Area Median Income (AMI).

Idaho Housing Second Mortgage: If you don’t have the funds for a down payment, you can apply for assistance of 7% of the home’s purchase price. It will essentially be a second loan where you have an interest rate of 2% higher than the rate of your 1st mortgage over 15 years. To apply, you must have at least a 620 credit score and complete a homebuyer education course.

Idaho Housing Forgivable Loan: The Idaho Housing Forgivable loan can help with down payments, but only up to 3% of the house’s total cost. However, the loan can be partially forgiven over time and completely forgiven after ten years. To utilize this option, you must contribute .5% to the house’s total cost.

Idaho Housing’s Idaho Heroes Loan: Similar to traditional second mortgages, Idaho Housing’s Idaho Heroes loan offers low-interest loans to veterans and current military members. However, it’s also available to teachers, retail workers, healthcare workers, law enforcement officers, and EMT workers. With it, you can take out a second mortgage that is 7% of the home's total cost.

Many cities also offer regional assistance, so it’s essential to research the specific programs based on where you want to live. NeighborWorks can also help connect you to a program that will help you most based on your situation.

Step-by-Step Guide to Applying for Homebuyer Assistance

To apply for any of these programs, first contact a NeighborWorks housing counselor. They will contact you to schedule a formal appointment to discuss their recommendations and guide you through the application process. You will also need to fill out an initial assessment and bring along formal income documents such as your W-2 and a recent paystub so that the Housing Counselor can fully understand your situation.

Then, you can apply by submitting an application and attaching documentation like a credit report and proof of income and residency. Ensure you stay informed on any deadlines some of these programs may have, confirm your submission, and stay current on your application’s status. You may also receive contact from the program asking for further information, and if you don’t reply, they may turn to another applicant for assistance.

Keep your documents on a removable computer drive, a physical folder, or your computer to streamline the process. Just make sure they are in a safe, secure place for you to access whenever the program agency or your Housing Counselor asks for them.

Evaluating the Pros and Cons of Homeownership vs. Renting

Although homeownership is ideal, it may not be for everyone, just as renting may not be for everyone. It ultimately depends on your situation. Renting involves less costs up-front and may be more flexible and convenient than homeownership. For example, renting may be best for you if you’re less willing to do maintenance on your property or would like to move more easily. On the other hand, you may be more interested in homeownership if you like the long-term financial benefits such as:

Equity growth;
Tax credits and benefits;
Personal satisfaction of renovating and making a house your own.

In addition, homeownership can be a lot more stable. After all, you won’t be subject to a landlord’s whims if they decide to sell or not renew your lease. Ultimately, you must decide which option resonates most with your lifestyle and goals.

Finalizing Your Home Purchase

Once you’ve gained pre-approval and placed an offer on the house, you’re so close to homeownership you can practically taste it! Before you speed-run through the final steps of your home-buying process, it’s essential to remember the following tips.

Navigating Home Inspections and Appraisals

First, you must seek an inspection and an appraisal. A qualified inspector will evaluate the structural and functional integrity of the home and highlight anything that may risk the home’s value, functionality, or even your safety. From here, an appraiser will conduct a similar inspection and compare the home to similar homes in the area to estimate the total market value of the home. Ultimately, these two processes ensure the home buyer pays for the marketed value.

To find the right inspectors and appraisers, seek recommendations from your realtor, home lender, or trusted family members and friends. You can also double-check the professional by evaluating reviews online.

Your realtor may have to negotiate with the seller about potential repairs. Ultimately, this negotiating process depends on your ultimate goal. For example, you must negotiate with the seller if you don’t want to pay for or complete the repairs yourself. Conversely, if you don’t mind completing the repairs yourself, you can seek a price adjustment to accommodate the cost of the fix. Your realtor should ensure negotiations are done with your best interest, at hand.

In the negotiation process, be flexible and keep an open mind. If the seller isn’t compatible, you can always walk away.

Closing on Your Home

Once you place an offer on a home, you enter the escrow period, during which a third party or company will hold a deposit from the down payment of the house during the closing process. This process ensures that the seller will follow through on their payment as they conduct an inspection, gain an appraisal and insurance, and go through the following process:

Conduct a final walkthrough of the property to ensure that all conditions and changes based on the inspection meet your expectations and no new issues have surfaced.
Review, and add any requests based on anything you noticed in the final walkthrough, and sign closing documents.
Pay any remaining closing costs, including lender fees, title insurance, appraisal fees, and escrow payments. Typically, these costs range from 2% to 5% of the purchase price.

The actual closing documents you receive will include the following:

Closing disclosure: This document outlines the loan term, amount, interest rate, disclosures, and associated closing costs.
Seller’s disclosure: Outlines known damages to the property that the seller acknowledges and has agreed to fix.
Proof of insurance: This document proves to the lender and the seller you have the house insured.
Title documents: This document passes the title and deed of the house to your name.
Loan application: This includes the specific terms of your loan and your details. Check for accuracy, as things might have changed. For example, if your credit score changes etc. Make sure not to change jobs, get new credit during the loan such as financing new furniture.

You should also bring all of this final paperwork, a form of identification, and a cashier’s check for the closing costs on the day of closing.

This may be a fast process, but it's important to be vigilant, especially before you sign any paperwork.

Additional Resources and Information for First-Time Home Buyers

In the past, first-time home buyers often sought out single-family homes with smaller square footage that a first-time homeowner could easily maintain. However, these homes have increased in price steadily over the past several decades — nearly 173%, which contrasts significantly with the 80% increase across the nation. The Idaho Department of Labor traces this rise to a lack of housing inventory in Idaho. Often, contractors can’t keep up with the demand for building new housing, and current homeowners are less likely to sell due to the competitive buyer’s market and rising interest rates.

It may seem tempting for a first-time homeowner to wait until the “market cools off,” but based on the history of home prices over the past several decades, prices will continue to rise steadily in the Gem state. Regardless of the market's state, you must decide to become a homeowner based on your preferences and lifestyle rather than relying entirely on external factors. By looking for a trusted advisor, you can become a homeowner easily, as long as you prepare for it.

Where Can I Learn More About First-Time Home Ownership?

Look no further for a trusted advisor in the home-buying process than NeighborWorks Boise. As a 501(c)(3) nonprofit, NeighborWorks provides access to programs and assistance to low- and moderate-income Idaho residents to own and keep their homes in the state. During the buying process, many first-time homebuyers may receive faulty advice, drastically affecting their financial situation and lifestyle. At NeighborWorks, though, we will give you expert advice based on your situation so you can fulfill your housing needs.

Don’t be scared. Buying a house is still tangible as long as you have the incentive to do so and the help to achieve your dreams.

FAQs for First-Time Home Buyers in Boise and Beyond

What Percentage of a Down Payment Do You Need to Buy a Home?

A down payment typically ranges from 3% to 20% of the home's purchase price, with specific programs allowing for lower down payments as low as .5%

Can First-Time Home Buyers Purchase with No Down Payment?

Programs like VA and USDA loans offer no down payment options for eligible buyers.

Are Closing Costs Included in Assistance Programs?

Some programs cover both down payments and closing costs, while others may only assist with one.

How Long Does the Preapproval Process Take?

Preapproval can vary, taking a few days to a few weeks, depending on the lender and the buyer's financial details.

What's the Difference Between Interest Rate and APR?

The interest rate is the cost of borrowing the principal loan amount, while the APR includes the interest rate plus other loan costs and fees.

How Can I Improve My Credit Score Before Buying a Home?

Improving your credit score involves paying down existing debt, making timely payments, and correcting any inaccuracies on your credit report.

Can I Buy a Home in Idaho If I'm Not a U.S. Citizen?

Non-U.S. citizens can buy property in Idaho but may face stricter mortgage requirements and must meet specific residency stipulations.

What Are the Most Important Factors Lenders Consider?

When evaluating mortgage applications, lenders look at credit score, income, debt-to-income ratio, employment history, and down payment amount.

How Can I Estimate My Monthly Mortgage Payment?

Monthly payments can be estimated using online calculators that factor in home price, down payment, loan term, and interest rate.

Is Homeownership Right for Everyone?

Homeownership offers benefits but also comes with significant responsibilities. It's suitable for those ready for a long-term financial commitment.