CHFA First-time Homebuyer
The Connecticut Housing Finance Authority (CHFA) is
committed to empowering first-time homebuyers with
information that can help them make responsible financial
decisions as they prepare for homeownership. If you are
considering buying your first home, but are uncertain how to
begin, let us guide you along the path towards
homeownership, one step at a time.
To help you achieve your dream of homeownership, CHFA
offers a variety of mortgage programs. (See,
CHFA Homebuyer Programs.) Some of our loan
programs provide supplementary assistance with the upfront
expenses associated with buying a home, like down payments,
inspection fees and closing costs. (See,
Downpayment Assistance Program.)
In partnership with over ten
HUD- and CHFA-approved
Housing counseling agencies, CHFA also provides free
homeownership education programs at different locations
throughout Connecticut. If you believe you might benefit
from comprehensive instruction in the financial and
practical details of buying and owning a home, register for
an eight-hour course today. (See,
Homebuyer Education schedule of classes.)
In addition, at any point along this journey, you can
direct questions to one of the more than 100 CHFA-approved
Participating Lenders (banks and mortgage companies) across the state.
Participating Lenders near you.)
Because buying a home can take several months, it’s
helpful to have a strategy. Following the basic steps
listed below will guide you through one the most important
transactions of your lifetime, the purchase of your
- Get pre-qualified for a mortgage.
- Get the help of a real estate agent.
- Find the right home for you.
- Make an offer on a home.
- Apply for a mortgage.
- Get a home inspection.
- Attend the closing prepared.
Step 1: Get pre-qualified for a mortgage.
A CHFA Participating Lender can assess your credit-worthiness
and eligibility for a home loan before you formally apply in
a process called “pre-qualification.” By evaluating your
household income, your savings and your existing debt, a
lender can tell you “how much house” you can afford. (For a
quick, do-it-yourself estimate of your mortgage limit, use
home affordability calculator.)
During the pre-qualification, you should also ask your
lender to provide you with a list of potential closing
costs. A lender is not required to provide you with a
formal quote of these costs until you actually apply for a
mortgage, but it may be prudent for you to have this
information early so you can budget for the overall costs of
the home purchase.
Though a pre-qualification is not a guarantee of
obtaining a mortgage on the home you hope to buy, obtaining
a pre-qualification before you make an offer on a home can
strengthen your negotiating position. A seller who is
confident in your ability to finance the purchase of a home
is likely to seriously consider your offer.
Remember that you are under no obligation to obtain a
loan from the lender that pre-qualifies you. However,
the lender can answer questions and provide further details
on the preliminary financial assessments and decisions you
need to make as you prepare for homeownership. (Find a
Participating Lender near you.)
Obtain credit counseling if needed to improve
If you learn during pre-qualification that your credit
status has temporarily put your dream of homeownership on
hold, register for free credit repair counseling services
provided by CHFA to prospective homebuyers. (See,
Education schedule of 8-hour classes for information on
counseling opportunities.) Or, take advantage of
not-for-profit resources available to consumers that provide
free debt management or credit counseling services. With a
plan in place, you can improve your credit score, build your
financial profile and move closer to realizing your dream of
becoming a homeowner.
Step 2: Get the help of a real estate agent.
While it is certainly possible to search for homes on
your own by scanning newspapers and internet sites dedicated
to real estate listings, you can place yourself at an
immediate advantage by enlisting the services of a
professional. Real estate agents have in-depth and
up-to-date knowledge of the communities and real estate
markets that you are considering. They can easily locate
neighborhoods and homes that not only fall within your price
range and the CHFA
sales price limits but satisfy many of your other
requirements as well. An agent can
search for a home that meets your specifications. In
addition, an agent can schedule opportunities for you to
view and tour homes. (See:
www.homegain.com, for information on realtors in your
Understand the real estate contract before you
Before you enter into a relationship with a real estate
agent, make sure you understand the terms of your
relationship and record them in a written contract. Your
contract should state specifically that the agent represents
you as the buyer. This will ensure that the agent is
representing your interests alone and not those of a
potential seller. Typically, agents are not paid upfront by
the buyer. Their fees are generally paid by the seller as a
commission drawn from a percentage of the sale price of a
home. Nevertheless, the terms and conditions of payment
should be clearly stated in your contract with your agent.
Step 3: Find the right home for you.
Once a lender has pre-qualified you by calculating the
maximum mortgage you can afford, the next step is to look
for and find the right home for you and your family that is
within your price range.
Describe your ideal home.
What does your dream house look like? How big is it?
Does it have a porch, a basement? How many bathrooms? How
much closet and storage space? How many bedrooms, windows?
Does it have laundry facilities? Does it come with
appliances? Does it have a garage? A backyard? Your agent
will ask you many questions to help you precisely describe
the kind of home you hope to buy.
A good agent will help you to focus on what you really
need, first. The agent knows that most first-time homebuyers do
not get everything on their “wish list” in their first home.
Describe your ideal neighborhood.
A good agent has the experience and resources to guide
you not only towards the right home for you, but to the
right neighborhood and community as well. A house that
seems perfect could become a source of future regret if the
location and the community do not mesh with your budget,
needs or lifestyle.
Part of your agent’s job is to help you to find a home
and a community in which you and your family are most likely
to thrive and find happiness. You and your agent will need
to consider whether a town or city is fundamentally
affordable to you. A typical list of questions that might
be asked include: Are the property taxes and other local
taxes within your budget? Will you be within reasonable
commuting distance to your workplace? Is there convenient
public transportation available to you and your family? If
you have children or intend to have children, is the school
system of good quality? Are there daycare centers nearby?
Are town services sufficient? Is there a public sewer
system? Are there sidewalks? Are there retail centers,
parks, doctors and dentists, a clinic or hospital nearby?
The questions that are important to you will differ from
other homebuyers. By discussing these questions with your
agent, you increase the likelihood of finding your future
home in a community where you will live happily.
Step 4: Make an offer on a home.
Once you have found a home that you hope to buy and are
poised to make an offer, your real estate agent will
represent you in drafting a reasonable offer and presenting
the offer to the seller’s agent. It is important to
remember that while you alone determine the price you are
prepared to offer, your agent can provide expert advice to
adequately protect your investment and interests in the
terms, conditions, contingencies and deadlines included in
Your offer should take into consideration the age and
condition of the home, the cost to make any repairs, the
desirability of the home’s location, how long the home has
been on the market and whether the seller appears motivated
to move the property quickly, among other factors.
The offer is legally binding.
Remember that your offer becomes a legally binding
contract that commits you to purchasing a specific property
at a specific price within a specific timeframe, as soon as
you make a good faith deposit and the seller accepts it by
signing the document. Typically, an offer is conditioned
upon the completion of particular actions by the seller
before the loan closing, like making certain repairs. The
offer is also typically conditioned upon the buyer’s ability
to obtain mortgage financing within a particular time
frame. This contingency protects you from losing your
deposit should you fail to secure a timely approval on your
home loan application.
The seller can accept, reject or counteroffer.
The seller has the option to accept your offer, reject
your offer or make a counteroffer which modifies some or all
of the conditions or terms of your offer. This negotiation
can alternate back and forth several times before an
agreement is reached and a contract is signed by both
parties that finalizes the terms and conditions of the
transaction. At this point, the legal ability of the seller
to entertain other offers ends.
Watch the clock and the calendar.
Timing and deadlines are very important in real estate
transactions. Once your offer is accepted and there is a
preliminary contract on the home purchase, you should make
sure to allow sufficient time to apply for and obtain
mortgage financing, to schedule the closing and the home
inspection of the property, and to negotiate the details of
the final contract known as the Purchase and Sale Agreement
between you and the seller.
Step 5: Apply for a mortgage.
Once you have a signed contract on a home, it’s time to
apply for a mortgage. Remember that you still must formally
apply for a mortgage even if you have already been
pre-qualified. Also remember that you are not obligated to
apply for a loan with the same lender that pre-qualified
Get the help of an Attorney.
Now is also the time to retain an attorney if you have
not already done so. Applying for a mortgage and purchasing
a home represent complex legal transactions. Having an
experienced advocate looking out for your interests is
important as you embark on these last steps towards becoming
a homeowner. (See, the
Connecticut Bar Association to find
a list of attorneys that practice real estate law near you.)
Meet with a CHFA Participating Lender.
If you wish to purchase your home with a CHFA mortgage,
you must meet with a CHFA
Participating Lender who will originate and process your CHFA loan
Keep in mind that there are eligibility requirements for
CHFA homebuyer programs. To be eligible, generally,
you must not have owned a home in the last three years.
If you have owned and it has been less than three years
since you sold or you are currently selling, you must be
moving to a
of the state. Also, in many cases, the home you
wish to buy must not exceed CHFA
sales price limits.
Similarly, your total household income, before taxes and
expenses, must fall within CHFA
income limits, unless you are moving to a
Your CHFA Participating Lender can help you select the loan
program with the most favorable interest rates to fit your
circumstances. Your lender will then guide you step by step
through the entire application process. (See,
Lenders near you.)
Your lender will discuss mortgage terms and
Your lender may discuss with you various types and terms
of mortgages. While CHFA only offers 30-year fixed rate
mortgages, some lenders offer more exotic alternatives.
30-year fixed rate mortgages are generally safe because they
lock in an interest rate for the life of a loan enabling you
to predict and plan your monthly budget. Some mortgages,
like adjustable rate mortgages (ARMs), are more risky
because their interest rates are reset after a period of
time. CHFA encourages first-time homebuyers to investigate
our mortgage programs.
Your lender will explain "PITI."
Your lender will explain the components of a monthly
mortgage payment known as “PITI.” PITI stands for
“principal, interest, taxes and insurance” and represents
the monthly loan service of principal and interest,
as well as the monthly
homeowners insurance premium, and
mortgage insurance premium, if required, (as well as any
other insurance premiums) that combine to form your monthly
For a CHFA mortgage, your taxes and insurances are
required to be escrowed, which means that your lender will
deposit the funds in an escrow account each month and pay them on
your behalf when they come due. Your lender will provide
you with a monthly breakdown of these components and will
explain the schedule of payment over the life of the loan.
Typically, a home loan is amortized, which means that you
will pay more interest than principal in the early years and
less interest than principal in the final years of the
loan. The amount of your monthly combined principal and
interest payment, however, will stay the same for the life
of the loan. Amounts required for property taxes and
insurance, on the other hand, can fluctuate. Should this
happen, the amount you will pay your lender each month will
also change. Your lender will notify you in writing
should these changes affect your monthly mortgage payment.
Your lender will provide a “good faith estimate”
of closing costs.
Federal law requires your lender to provide you with a
“good faith estimate” of closing costs within three days of
applying for a loan. Closing costs can range from between
3% to 5% of the sale price of the home.
Closing costs include fees associated with the services
provided during the processing of your mortgage
application. Some of these fees cover the costs of the
credit report, the title search, the title insurance, the
lender's attorney, the buyer’s attorney, the home appraisal,
the property survey, the document recording and the transfer
taxes. Closing costs also include escrow accounts. Knowing
what your closing costs will be in advance helps you to plan
your budget for the loan closing, which is when you will be
required to pay them.
If you do not have funds saved for closing costs, you may
be eligible to borrow the closing costs through CHFA's
Downpayment Assistance Program. This becomes a
second mortgage on the property.
Step 6: Get a home inspection.
A home inspection protects your interests.
The expression “buyer beware!” holds especially true when
the buyer is purchasing a home. Hiring a licensed, independent home
inspector licensed by the State of Connecticut to visually
inspect the home you hope to buy will provide you with
information that you and your agent will need as you
negotiate the terms and conditions of the contract.
Typically, the mortgage insurer of the loan will inspect the
home and require that the home meet local ordinances with
regard to health and safety. You will be responsible
for paying for the home inspection done by an independent
home inspector if you choose to have one. Some buyers
and sellers agree to share the cost of the repairs.
Even under circumstances where the seller provides you
with an inspection report or offers you a home warranty, a
prudent homebuyer will insist on obtaining an independent
inspection. This will lower the risk of any unforeseen
surprises that could either defeat your effort to buy the
house or, worse, lead to costly repairs after you buy the
house. Homebuyers and home sellers alike depend on
accurate home inspections to help them reach fair agreements
regarding the sale of a home.
A home inspection is not an appraisal.
All lenders and mortgage insurers require an appraisal to
confirm that the home and the value of the home meet their
requirements, but an appraisal is not the same as an
inspection and you should not rely on the appraisal to
assess the condition of the home you are purchasing.
An appraisal is intended to assess the value of a home
based on the value of comparable homes in the neighborhood
for insurance purposes. On the other hand, a home
inspection is intended to ensure that a homebuyer is
thoroughly informed as to the condition of the home prior to
purchase. Nevertheless, you should plan to be present
during the lender’s appraisal of the home.
A home inspector should be state-licensed.
Hiring a qualified, licensed home inspector is
essential. Often your real estate agent, your attorney or
your lender can provide you with a list of local home
inspectors. Be sure to screen out unqualified candidates
by asking for multiple references and contacting them. Also
make sure you verify that the candidate has a valid and
current Connecticut Home Inspector’s License with the
Connecticut Department of Consumer Protection. Finally,
make sure you are present during the home inspection.
A licensed home inspector will thoroughly examine a
detailed list of elements in the home you hope to buy.
Generally, your inspector will examine the structure of the
home, including the roof, walls, ceilings, floors, windows,
doors, foundation and basement as well as the heating,
plumbing, electrical and air conditioning systems. You can
also hire an inspector to inspect for termites, radon, lead
paint and asbestos.
A home inspector should provide a written report
A good home inspector will provide you with a written
report immediately following the inspection. Any conditions
of disrepair in the inspector’s report can reopen
negotiations with the seller. You may decide to condition
your offer on the seller paying for and making repairs
before the transfer of property at the loan closing. You
may also decide to lower the purchase price of your offer to
account for the costs that you will incur to make the
repairs. A failed inspection usually allows the buyer
to withdraw from a contract entirely, as long as this
contingency was included in the buyer’s offer.
Step 7: Close on your home.
The closing is the last step in the process of buying
your home. “Closing” refers to the transaction during
which you close your deal with the seller to buy a home at
the same time that you close your deal with your lender to
borrow a loan.
Schedule the closing with room to spare.
If you have been a renter before venturing down this path
to homeownership, be especially aware of the timing of the
closing. Allow a week or more before your lease expires to
give you ample time to paint, make any repairs and to
physically move your family and your belongings into your
new home. Moving often takes several days.
If you are selling a house and buying another, remember
that you must schedule two closing dates in the right
order. Be sure to “close” on your first home before you
“close” on your new home so that you will have the proceeds,
from the first transaction available to you to cover some of
the costs of the second transaction.
Conduct a final walk-through of the home before
Conduct a walk-through or last inspection of the home
with the seller and your attorney 24 hours before the
closing to ensure that the home is in acceptable, move-in
This is important because, once you close on the property,
you will lose any legal recourse against the seller for a
condition that you did not previously discover.
Come to the closing prepared.
Your attorney will provide you with detailed information
about what you must bring to the closing. In general, you
will be required to bring two forms of identification as
well as a certified cashier’s check to cover the exact
amount of the closing costs you have agreed to pay. (Who
pays closing costs can be a subject of negotiation with the
seller. Talk to your agent about this.) CHFA
allows for seller paid closing costs of up to 6% of the
total closing cost amount associated with the purchase of
This is the step in the home buying process when your
attorney’s expertise is particularly relevant. Make sure
you ask your attorney any questions that occur to you before
the closing. Come to the closing prepared to carefully
read and sign closing documents and do not hesitate to ask
more questions during the closing. It is vital that you
understand all documents before you sign them.
Familiarizing yourself ahead of time with some of the
mortgage and real estate documents that are likely to be
included in your closing will minimize the potential for
surprises and confusion.
Some or all of the following documents related to your
home loan will be presented to you at your closing:
- Truth in lending statement lists
the interest rate, annual percentage rate, amount
financed and the total cost of the home loan over its
- Itemization of amount financed
summarizes the finance costs of the loan.
- Monthly payment letter breaks down
your monthly payment into principal, interest, taxes and
- Mortgage puts a lien on the house
as security for the loan, which allows the bank to
foreclose if you default.
Some or all of the following real estate documents
connected with the sale of the home will be presented to you
at your closing:
- Settlement Statement contains all
settlement costs and amounts.
- Warranty deed guarantees that the
seller has the right to sell the property and is signed
by the seller and the buyer to transfer title of the
- Proration agreements describe how
you and the seller will divide the costs associated with
the home for the current month. These costs could
include property taxes or condo association fees.
- Name affidavit certifies that you
are who you say you are.
- Acknowledgment of reports signifies
that you have seen all of the reports regarding the
property, including surveys and inspections.
- Search or Abstract of Title lists
the documentary history of the property including all
titles and all liens. This document ensures you that
the seller has clear title to the property and that
there are no claims against the property by other
Take the keys and move into your new home.
At the loan closing, the title of the home will be
transferred from the seller to you. Also, the mortgage
agreement between you and your lender will be finalized,
which will enable you to pay the seller with the proceeds of
the loan at the same time you receive title to your new
home. Your attorney will ensure that payment is
made on your behalf at the closing.
The closing often takes place in the office of the
seller’s attorney but can take place at any mutually agreed
upon location. You can expect multiple participants at the
closing. Besides yourself, among those present will be the
seller and his attorney, the real estate agents and/or
brokers, your attorney and the lender’s attorney.
At the closing, your lender will give you a mortgage
payment schedule which will include payment instructions. At
the end of closing, you will leave with a folder full of
paperwork and a set of house keys (or two!).
Congratulations; you are now officially a homeowner!
Disclaimer: CHFA intends the following guide to be
viewed as representative of the steps that are commonly
involved in buying a home and therefore as advisory only.
We encourage all prospective homebuyers to seek information
from a variety of sources, to avoid relying on any one
source exclusively and to seek professional support and
advice when necessary.