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Top 5 Home Loan Programs for First Time Buyers

by Jon Silver

Buying a house is complicated, especially if you have never done it before. Many first-time buyers are really intimidated by the home buying process. Fortunately, there are several good home loan programs available for first-time buyers that make the process easier and less expensive. With homeownership rates trending negatively, you can bet that the government will be investing heavily in first time home buyer programs in the coming years. Read on to learn about these great home loan programs.

#1 FHA

This government inspired agency still produces top home buying program for first time home buyers in the United States. One of the problems with buying your first home is that you do not have equity in a current property. When a current home owner sells their home and moves into a new one, they generally have equity available that may be used for a large down payment. Most first-time buyers do not have this luxury.

The FHA program is sponsored by the Federal Housing Administration. It allows credit-worthy borrowers to buy a home with a very small down payment – as low as 3.5%. For a $200,000 home, this is only $7500. For decades, Americans have been choosing FHA for first time home buyer loans partly because they just it.

Also, if you do not have good credit or have a limited credit history, you may be able to get a FHA Loan. Because the loan is 'guaranteed' by FHA, more lenders are willing to work with borrowers with limited or average credit. Interest rates are a bit under conventional rates as well. Generally, you will want to have a credit score of at least 620 to qualify for a mortgage insured by the FHA. You can have a lower score, but you will need to bring a 10% down payment. However, you can use gift funds from family members for the down payment. Check todays FHA rates online.

#2 VA

If you are a current military member or a veteran, you are really in luck as a first time home buyer. The VA guarantees loans for members of the military, and you can get a loan with zero money down. That's right: VA is one of the few programs available today that has 100% financing loans available. Your interest rate also will be a bit lower than FHA rates, so this can be a really good deal.

#3 USDA

Many first time home buyers are unaware of the USDA program. Most financing experts would agree that USDA loans are the best kept secret in the American mortgage market today. This is a homebuyer's assistance program sponsored by the US Department of Agriculture. It is designed to encourage low and moderate income borrowers to buy homes in rural areas. The USDA guarantees the loan so more lenders are willing to work with borrowers with limited credit history. 100% financing is available if you have a credit score above 640. Like FHA loans, the rates are very low. The only down side of this zero down mortgage program is that not every home will qualify. Your home needs to be in a 'rural' area as recognized by USDA.

first time home buyer loans

#4 Good Neighbor Next Door

This is a HUD-sponsored program that originally was known as the Teacher Next Door Program. It since has been expanded to include police, firefighters, and emergency medical technicians (EMTs). It allows some homebuyers to qualify for a fantastic 50% discount on the list price of homes that are in 'revitalization areas' of major cities.

You will have to buy a HUD-approved home, but this program can make a lot of sense for a person with moderate income who works in government service. You do need to commit to live in the home for three years, but this is a great way to get a home for the first time.

#5 1% Down Payment Loan

This is a new conventional mortgage being offered by Quicken Loans and other lenders. If you have suitable credit, you can get a home loan with as little as 1% down, and the program will give you 3% equity in the home. You will pay a slightly higher interest rate for this benefit, but this can be a good option for some first time borrowers. You will need to have a 680 or higher FICO score, and you have to earn under the median income for your county. So, if the income limit in your area is $100k, you will need to earn less than that. Further, your debt to income ratio must be under 45%.

While buying a home for the first time can be complex and stressful, buyers in 2017 really do have many excellent options available. With plenty of programs that offer very low or even zero down loans, it really has not been easier to get into a home than this for many years.

To maximize your chances of being approved for a loan, just be sure that you have steady bill payment and credit card payment history for the last year before you apply. Before you know it, you will no longer be paying rent and will be living in a home of your own.

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