Best Mortgage Options For First Time Home Buyers

Best mortgage options for first time home buyers


Best mortgage options for first time home buyers

11 Financing Programs for First-Time Home Buyers

The improvement in recent years of the real estate market has benefited many people, from buyers to sellers to investors.

But even with relatively low-interest rates and some affordable housing options in the right areas, there is still a big gap between the number of people that want to own home and those that are able to make a purchase.

Even affordable homes cost more than the average person has in his or her bank account, which means getting a mortgage is inevitable.

Unfortunately, standard mortgages are not always accessible for many people, especially first-time home buyers.

The difficulties first-time home buyers face when trying to get a mortgage are no mystery. There are a number of programs designed to help buyers like you to get a mortgage and purchase a home.

One or more of these programs might be perfect for your specific situation.

Financing Basics For First-time Homebuyers

Part of deciding which option to choose will entail picking the right lender. Not every mortgage lender has the same programs. Some mortgage companies specialize in some loan types but not others.

Working with a mortgage broker is often a sound financial move to figure out which loan options will work best.

First Time Home Buyer Mortgage Programs 2019! Best Home Loans for First Time Buyers

It is, in fact, one of the first steps in preparation for becoming a homeowner.

Check out the list of mortgage programs below and pursue any you think you could qualify for.

There may be a program that offers just what you need to become a homeowner finally.

1. USDA Loan

Many people have never heard of this program, but it does exist and offers pretty impressive benefits for those that can take advantage of it.

Managed by the U.S. Department of Agriculture (USDA), the program is targeted toward homes purchased in rural areas.

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But don’t think that you have to have plans to build and manage a farm to get help from the program.

There are income limitations to the program, though, which may keep you from qualifying. The location of the property also matters. With this type of loan product, there are restrictions on the number of people living in the community for which a mortgage can be given. For USDA loans the population of the area you are looking in needs to be under thirty-five thousand people.

To make your way seamlessly through the program you will need to have a credit score of 640 or higher.

First-time buyer mortgages

It is still possible to qualify for a USDA loan if you have a credit score below 640, the process is just more complicated and requires more documentation to verify that you can make your payments.

With a USDA loan, you may not have to have a down payment, and you can expect your mortgage to be fixed month to month. Take a look at the full list of requirements for a USDA loan along with lots of other helpful information.

2. Good Neighbor Next Door

The Good Neighbor Next Door is another program that goes under the radar for many first-time home buyers, which is a shame because it is quite exciting for those who qualify.

The program is sponsored by HUD and targeted towards those in the public service sector, including police officers, firefighters, pre-K through 12th-grade school teachers, emergency medical technicians, etc.

Best mortgage options for first time home buyers

If you qualify, you may be able to get a 50% reduction in the price of a home if you purchase property in under-served areas classified as “revitalization areas.”

You can search for qualifying homes on the site for Good Neighbor Next Door.

Just remember, you will need to stay in the house for at least 36 months after purchase.

5 first-time homebuyer mortgage options

Obviously, this type of loan is not going to be worthwhile for everyone. For some folks, however, it could be a godsend.

3. FHA Loan

An FHA loan is an extremely popular mortgage product.

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Lots of home buyers opt to get a loan through FHA mortgage providers. The Federal Housing Association is part of the U.S. Department of Housing and Urban Development (HUD).

With an FHA loan, you have the backing of the FHA, which makes you much more appealing to lenders.

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If you cannot pay your mortgage for some reason, the FHA will pick up the tab.

FHA loans are pretty desirable for most home buyers because of the favorable terms they offer, including small down payments, competitive interest rates and lower closing costs than standard mortgages.

You need to have a credit score of 580 or above to get the best terms for the loan, including a down payment of as little as 3.5%. If your credit score is lower than 580, you will need a 10% down payment.

Quite often borrowers will look at an FHA loan when they don’t have a twenty percent down payment.

With an FHA mortgage, you don’t need to pay private mortgage insurance.

Mortgage Programs For First Time Home Buyers

PMI can be expensive. It is a useless fee that homeowners continue to pay until they have established twenty percent equity.

4. VA Loan

For veterans, surviving spouses and active-duty military personnel, VA loans offer a great way to get into a home at a favorable rate with no down payment. The VA loan program is quite generous—not only do you not need a down payment, but you also get competitive interest rates and don’t have to pay for private mortgage insurance (PMI) either.

And if your loan becomes too difficult to pay, you can get help from the VA to negotiate better terms with the lender.

Take a look at a full summary of benefits for VA mortgages.


Home Mortgage Options For First Time Buyers

Energy Efficient Mortgage (EEM)

The EEM program was created to encourage homebuyers to improve the energy efficiency of their homes. These loans are insured through the FHA or VA departments, making it possible to make improvements to the house you purchase without needing to increase the amount of your down payment.

Instead, the cost of the energy efficient improvements is rolled into the primary loan.

You can find a variety of potential green improvements that you could make to your new home. Some of the most popular include installing double paned windows, improving your HVAC system and adding new insulation to improve energy retention.

This type of loan product can also be used under the FHA 203k rehabilitation loan initiative as well.


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Native American Direct Loan

As the name implies, this type of mortgage program is available to only certain people who qualify. The Native American Veteran Direct Loan program was implemented in 1992 to help Native American veterans to purchase homes on federal trust lands.

The loans are obtained through the VA and offer many of the same benefits as a standard VA loan.

Closing costs are low, the interest rate is fixed for 30 years, no down payment is required, and the need for private mortgage insurance (PMI) is waived.

Additional perks with this program include the ability to borrow up to the FannieMae/FreddieMac conforming loan limit on a no-down-payment loan in most areas—and more in some high-cost counties.


FHA Section 203(k)

Some home buyers are primarily interested in purchasing a home to fix it up and add value to the property.

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Whether you are looking for a fixer-upper because it makes sense for you financially, or because you love DIY work, you should take a look at the Section 203(k) rehabilitation program.

With this loan, you can make a down payment of as little as 3% and get enough money through the loan to make the repairs you need to make to the home.

The funds you borrow for home improvements are included in your primary loan, which puts you in a much better financial position than you would be if you had to get a separate loan for the improvements.

Over my time as a real estate agent, the 203k loan has been a great financing option for a few of my clients.

They work wonderfully for those properties that are being “purchased as is.” You know the ones I mean – A little rough around the edges so to speak.

Buyers can come in and add their personal touch, totally transforming what some might call a dump into an excellent home.

Take a look at this helpful resource for finding a 203k lender in your area.


Best mortgage options for first time home buyers

Fannie Mae and Freddie Mac Loans

Both of these mortgage companies are operated by the federal government, which means they specialize in helping low and mid-income borrowers purchase homes. If you get a loan through your lender that is backed by either of these companies, you should be able to get a competitive interest rate and pay a low down payment.


Best mortgage options for first time home buyers

Fannie Mae’s Home Path Ready Buyer Program

A Home Path Loan is geared towards those buyers who are interested in buying a foreclosed or bank-owned Fannie Mae home.

It’s worth noting that these properties are going to be less prevalent given the fact we are no longer in a recession.

The chances of finding one of these homes will be more of a challenge.

Best Mortgage Options for First-Time Buyers in Washington

If you do, however, find a Home Path Property eligible borrowers can get up to 3 percent in closing cost assistance toward the purchase.

Borrowers are required to take an online buying education course before qualifying.

10. Grants and Programs From Local Entities

The federal programs for first-time home buyers are great, but they are not the only option available in many areas. It is worthwhile to explore what local options you may have for grants and other homebuyer programs.

Your state or even your local community may have a plan that you qualify for, one that will make buying your first home more accessible and more financially sound.

For example, here in my home state of Massachusetts, they have a great financing option known as the Mass Housing Loan.

There are some specific benefits of the Mass Housing loan including the following:

  • Loan servicing that is done in-house.
  • Flexible underwriting and income limits for qualified buyers.
  • The ability to get down payment assistance to qualifying borrowers, for up to 3% of the purchase price or $12,000, whichever is less.
  • A Mass Housing Mortgage can be used to finance the purchase and rehabilitation/repair of a home similar to a 203k rehabilitation loan.

You can also consult with your real estate agent to see if he or she knows of any programs you can take advantage of.

10 first-time homebuyer loans and programs

A reputable Realtor will be aware of all the programs you could benefit from and can help you choose which is best for your individual circumstances.

11. Conventional Loan Financing

Conventional loans are of course the most common type of mortgage funding that buyers use.

They are also more popular than any other kind of loan by a wide margin. Conventional loans offer fixed and adjustable interest rates.

A conventional loan is not insured or guaranteed by the government.

A guide to mortgages for first-time buyers

These type of loans are backed by private lenders, and its insurance is usually paid for by the borrower. You can now get a conventional loan with only a three percent down payment.

Borrowers who opt for a conventional loan and put less than a twenty percent down payment will be required to pay private mortgage insurance.

Best mortgage options for first time home buyers

It may take a while, but you will be able to cancel your PMI once you reach the twenty percent equity threshold.

Additional Helpful First Time Home Buyer Resources Worth Studying

Use all of these home buying resources to educate yourself on the process of buying a home.

Additional Real Estate Articles From Professionals

Use these additional top-shelf resources to make the best decisions when buying a home.


About the Author: The above Real Estate information on mortgage programs for first-time buyers was provided by Bill Gassett, a Nationally recognized leader in his field.

Bill can be reached via email at [email protected] or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 32+ years.

Are you thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service Real Estate sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton and Uxbridge MA.

Filed Under: Featured Articles, Metrowest MA Home Buying