Mortgages for First Time Homebuyers

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There are several types of mortgage loans available for first-time homebuyers.

first time buyer mortgagesFHA

FHA Purchase Loan is the most popular right now because of the very affordable 3.5% down payment requirement.  According to FHA, the down payment varies depending on the borrower’s credit score:
•Credit scores from 500 to 579 require a 10% down payment
•Credit scores at 580 or better require only a 3.5% down payment

A great selling perk for FHA is that family members can gift 100% of the down payment funds to borrowers. And for the hands-on buyer, the 203k loan offers the opportunity to purchase a property in need of work and secure a loan to covers the costs.


VA (Department of Veterans Affairs)

Just as the name implies VA insures loans made to active military or veterans. And VA Loans plays a role in financing first-time homebuyers.  The big seller for vets is “zero down loans” which means no down payment is required.

•Buyers eligible for VA loans
•Are currently active military?
•Served 90 consecutive days of active service during wartime.
•Served 181 days of active service during peacetime.
•Served more than 6 years in the National Guard or Reserves.
•Are the spouse of a service member who has in the line of duty or as a result of a service-related disability.

 Fannie and Freddie

FHA and  VA  loans are insured by the federal government. Conventional loans are not guaranteed by the US Government. Fannie Mae and Freddie Mac provide mortgage loans to all types of buyers. Generally, borrowers need higher credit scores to get a conventional loan than an FHA Loan.   For borrowers with credit scores between 580 and 620, an FHA loan may be your only option.

If your credit score is higher than 620, you may qualify for a program like the Conventional 97.  Conventional 97 is a Fannie Mae loan program for low and moderate-income borrowers. Conventional 97 designed to compete directly with FHA purchase loans.

•3% down
•Borrower must be a first-time homebuyer
•No income limit
•Only a fixed-rate loan

HomeReady is another Fannie Mae loan program for low and moderate-income borrowers. HomeReady is more flexible than other conventional loans. For example, household income from non-borrowers (i.e. family members and/or roommates) may be considered as an income factor.

•3% down
•Don’t need to be a first-time homebuyer
•Must take a homeownership course to qualify
•Income limits apply
•Family and roommate income may be used
•Only fixed-rate loans allowed

Home Possible is a low down payment mortgage programs from Freddie Mac. Home Possible mortgages are ideal for first-time homebuyers, millennials and move up borrowers (folks who’ve previously owned a home).

•3% to 5% down
•Must take a homeowner education course to qualify
•No income limit if the home is located in an underserved community

Additional Resource:  Ultimate First Time Home Buyer Guide

If you qualify the major benefit of a conventional loan is that the mortgage insurance premium you’re required to pay will eventually go away. 

Also, check with local banks and credit unions for local programs boosting homeownership for first-time homebuyers.  Call/Txt with questions.