Buying your first place can be intimidating and flat out overwhelming if you’re not familiar with the mortgage process. The good news is we put together a comprehensive list of the best loan programs that you, as a first time homebuyer, should be aware of. These programs offer different benefits depending on your unique situation and are designed to help you reach your goal of homeownership. All with less money out of your own pocket.
Here are the 9 first time home buyer programs we recommend checking out when you’re looking to purchase your first home:
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1. FHA loan
A home loan guaranteed by the Federal Housing Administration (FHA) could be a great fit for first-time homebuyers (and repeat buyers) with less-than-stellar credit and little cash savings. The borrowing requirements for FHA loans aren’t as stringent as those for conventional loans — you just need a minimum 640 credit score to qualify.
You have a 3.5% down payment or gift from a family member
You have a 640-credit score and 2 years employment
You’re buying a one- to four-unit property as your primary residence
2. VA loan
Active-duty service members, veterans and their eligible spouses may qualify for a loan insured by the U.S. Department of Veterans Affairs. The advantage here is that you won’t need to make a down payment to qualify for a VA loan. VA borrowers also don’t have to pay mortgage insurance premiums.
You’re a military service member, veteran or eligible spouse
You have a minimum 640 credit score (typically required by VA-approved lenders)
3. USDA loan
The U.S. Department of Agriculture also insures 0% down payment loans. The catch is you must buy a home in a rural area and meet certain income requirements. Carefully consider what’s important to you in a home and a location. If you want something walkable in a more urban setting, a USDA loan probably isn’t right for you.
You have a 640-credit score, though you may qualify with a lower score
Fannie Mae, one of the two largest agencies that buy and sell mortgages, offers a conventional first time home buying program called the Standard 97% LTV loan. LTV is short for loan-to-value ratio, which is the percentage of a home’s purchase price being financed by a mortgage after the initial down payment. A maximum 97% LTV ratio is allowed under this program, which means you’d only need a 3% down payment to cover the rest which is very attractive.
You or a co-borrower are a first-time homebuyer (meaning you haven’t owned a home in the past three years)
You must complete an online homeownership education course (your lender will provide access)
All borrowers must have a minimum credit score of 640 and qualify based on their income and employment history. Max debt-to-income ratio is 45%
5. Fannie Mae HomeReady® loan
Another great option from Fannie Mae, the HomeReady® mortgage helps first time buyers and repeat buyers. The program was created to help low to mid income earners. It has flexible guidelines and a low down payment requirement of 3%. This program allows for all or a portion of the down payment to come from a family in the form of a gift. The main difference between this program and the Standard 97% is that there are income limits. Basically, you can’t make too much money compared to the average income in the county you’re buying in.
HomeOne℠ Available to qualified first-time homebuyers for a low-down payment of just 3%, the Freddie Mac HomeOne℠ mortgage is a low-down payment option that serves the needs of many first-time homebuyers. There are no income limits, but there is a homebuyer education requirement when all borrowers on the loan are first timers.
You or a co-borrower are a first-time homebuyer
You have a minimum 3% down payment
You have a minimum 640 credit score
7. Freddie Mac Home Possible loan
Freddie Mac Home Possible mortgages are designed to grow your business and attract low- and moderate-income borrowers, first-time homebuyers, and underserved communities. Use the resources below and discover why a Home Possible mortgage may best fit for your borrowers’ needs. Regardless of what type of buyer you are you must meet the income limits in the county you are purchasing in.
640+ credit score
You’re a first time or repeat homebuyer
You earn an income equal to or less than 80% of your AMI
Both Fannie and Freddie Mac programs require private mortgage insurance (PMI) if you’re putting down less than 20%, luckily these are at a reduced rate compared to other programs, so it ends up being reasonable. Don’t worry, PMI is cancelable after you’ve reached 20% equity in your home.
8. HomePath™ Ready Buyer program
The HomePath Ready Buyer™ program from Fannie Mae is for first-time homebuyers and provides home buying assistance for borrowers with their closing costs — covering up to 3% of the home’s purchase price.
You buy a Fannie Mae-owned, foreclosed property from HomePath.com
9. HUD’s $100 Down Program
The program is also referred as the FHA $100 Down Program. This specialty FHA mortgage was designed to remove some of the barriers to home ownership and make it easier for buyers to purchase HUD homes. HUD homes are 1 to 4 unit properties owned by the US Department of Housing and Urban Development (HUD) through foreclosure.
Primary residence only
Must purchase for full asking price
640 minimum FICO score
Borrowers will also need to meet the income, asset, and minimum property standard requirements specified by the FHA.
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