It’s an exciting time in your life. You are ready to buy your first home. Before you start your home search, your most important step will be making sure you can qualify for a mortgage loan. It’s a very smart idea in today’s market to get pre-approved for your home loan, so you know what you can actually afford and to strengthen any purchase offers you make.
Another important factor in the mortgage lending process is figuring out which type of mortgage loan is right for you. There are different home loan programs offered by various lenders and backed by the government. As a first-time home buyer in Atlanta, you will want to explore all your options. You can determine which mortgage program(s) you qualify for and which will offer the best mortgage rates and terms based on your financial situation.
Let’s take a look at some of the best mortgage loan programs available for Atlanta first-time home buyers:
Conventional Mortgage Loan
A conventional loan is also sometimes known as a “conforming” loan because it meets the standard requirements to be backed by government housing agencies, Fannie Mae or Freddie Mac. These agencies purchase mortgages from lenders and resell them to investors. This provides less risk to lenders, and that can work in the borrowers’ favor. Here are some of the standard qualification requirements for first-time home buyer conventional mortgage loans:
• Down Payment: At least 3%, though it may be higher depending on your financial situation, type of loan and type of property
• Credit Score: 620 or higher
• Debt-to-Income Ratio (DTI): 50% or lower
• Loan Limit: $647,200 for a single-family home in Georgia
FHA Loan
An FHA mortgage loan is backed by the Federal Housing Administration and is one of the most common types of mortgages for first-time home buyers. FHA loans offer softer qualification requirements compared to conventional loans. In general, more people can qualify for this type of mortgage loan. Here are some of the standard requirements to know:
• Down Payment: At least 3.5%
• Credit Score: 580 or higher
• DTI: 43% or lower
• Loan Limit: Varies depending on location and property type
Qualification requirements for FHA loans can vary for each mortgage borrower as the lender will review all your financial factors. For example, a first-time home buyer may qualify for an FHA loan with a FICO score as low as 500 if they have a down payment of more than 10%. DTI requirements may be affected by a higher or lower credit score and/or down payment.
VA Loan
VA loans are backed by the United States Department of Veterans Affairs and are available only to active-duty military service members, retired veterans and surviving spouses who meet their specific eligibility requirements. VA loans offer lower-than-average mortgage rates and can provide 100% financing, meaning no down payment is required. This is a great option for Atlanta first-time home buyers if you qualify. Here are the requirements to know:
• Down Payment: 0%
• Credit Score: 620 or higher
• DTI: 41% or lower
• Loan Limit: None
Again, these numbers can vary from lender to lender and from borrower to borrower. You may qualify for a VA loan with a lower credit score if you have a lower DTI and vice versa. Make sure you are working with a VA-approved mortgage lender. Not all lenders are qualified to offer this type of mortgage loan.
USDA Loan
USDA loans are backed by United States Department of Agriculture. This is another great government-sponsored loan program designed to help first-time home buyers and other home buyers with low-to-moderate incomes. These mortgage loans are only available in areas designated as “rural” by USDA standards. High-population communities in and around Atlanta will not be eligible, but there are areas further outside of the city and throughout Georgia that will qualify. If you are looking to buy a property in one of these areas and you meet the income requirements, you will definitely want to explore zero-down-payment USDA mortgage solution with a USDA-approved mortgage lender. Here are some of the basic requirements:
• Down Payment: 0%
• Credit Score: 640 or higher
• DTI: 41% or lower
• Loan Limit: $647,200 in Georgia
• Income Limit: No more than 115% of the area’s median income
For USDA loans, the property must be in an eligible “rural” location and the borrower cannot exceed predetermined income limits for the area. A higher credit score is generally required, but qualification standards can vary based on income, DTI, down payment and other financial factors.
Make the Right Mortgage Decisions
As a first-time home buyer in Atlanta, GA, you will want to look into each of these options if you think you might be eligible. Even if you qualify for a zero-down-payment mortgage program like VA or USDA, you will still want to put down as much as you can comfortably afford. All of these mortgage loan programs will require additional mortgage insurance (PMI or MIP) payments until you have reached a specified payoff amount on the loan (typically 20% of the total loan amount).
Before you are ready to buy, you will want to work to increase your credit score, pay down your existing debts and save up for a healthy down payment. All of these factors will help you qualify for better mortgage rates and ensure mortgage pre-approval ahead of your home search.
For help with all your Atlanta mortgage needs, count on Moreira Team | MortgageRight. Let us answer all your questions, explore all your options and make the right mortgage decisions for your first-time home purchase.