As a first-time home buyer, you’ll have access to special mortgage programs with low down payments and flexible guidelines. Show
You might even be in line for a grant to help with your down payment and closing costs. First-time home buyer grants are available in every state. If you’ve got decent credit but you’re low on cash, you just might qualify for one. In this article (Skip to…)
>Related: How to buy a house with $0 down: First-time home buyer First-time home buyer loan requirementsPlenty of home loan programs cater to first-time buyers. Many of these programs have looser eligibility guidelines to accommodate borrowers with lower household income, credit scores, or down payments. Here are the basic requirements to qualify for some of the most popular first-time home buyer loans: First Time Home Buyer LoanMinimum Down PaymentMinimum Credit ScoreMaximum DTIOther Requirement(s)FHA Loan3.5%58050%No income limit Conventional 97 Loan3%62043%No income limitFannie Mae HomeReady Loan3%62045%Income can't exceed 80% of area median incomeFreddie Mac Home Possible Loan3%66045%Income can't exceed 80% of area median incomeVA Home Loan0% 580-62041%No income limit / Must have an eligible military service historyUSDA Home Loan0%64041%Income can't exceed 115% of area median income / Must buy in eligible rural areaFHA 203(k) Rehab Loan3.5%58045%$5,000 minimum rehab costsNot all the rules listed above are necessarily set in stone. For example, you might be able to qualify for an FHA loan with a credit score as low as 500, as long as you can make a 10% down payment. Or you might qualify for a Fannie Mae loan with a debt-to-income ratio as high as 49.99% (must be below 50%), instead of 43%. But you’ll need other compensating factors (like a bigger savings account) to qualify. So explore your loan options. Even if you have special circumstances, it’s likely easier to qualify as a first-time home buyer than you think. Specialty first-time home buyer programsCertain home buyers have access to special loan programs depending on their occupation or location. For instance, the VA loan — backed by the U.S. Department of Veterans Affairs — is only available to veterans, active-duty service members, reservists, and members of the National Guard. For those who qualify, a VA loan is often the best loan option. Zero down payment is required, and VA homeowners never pay private mortgage insurance (PMI). Similarly, the USDA loan program allows zero down payment, reduced mortgage insurance costs, and below-market mortgage rates. But the U.S. Department of Agriculture only backs these loans in sparsely populated and rural areas, so not every home purchase is eligible. Other home buying programs exist for public servants like teachers, firefighters, doctors, and other first responders. For example, the Good Neighbor Next Door program can offer 50% off a home’s purchase price for teachers, firefighters, and EMTs. But they must buy a home listed for sale by the U.S. Department of Housing and Urban Development (HUD) in a targeted revitalization area. Select mortgage lenders offer their own discounted programs for first-time home buyers, too. Make sure you shop around for your first mortgage loan and ask lenders what they can offer for a first-time buyer. How to qualify for first-time home buyer grantsThe requirements to qualify for a first-time home buyer grant depend on the down payment assistance programs available where you live. “Every state in the country has a housing finance agency, and all offer special programs for first-time buyers,” says Anna DeSimone, author of Housing Finance 2020. She explains that first-time home buyer assistance typically comes in one of two forms:
DeSimone notes that agencies typically offer grants around 4% of the home purchase price. “And many programs also provide additional assistance to cover closing costs.” Of course, whether or not you qualify for a first-time home buyer grant will depend on local guidelines. Angel Merritt, mortgage manager with Zeal Credit Union, explains that each of these programs has different qualification requirements. “Typically, you’d need a 640 minimum credit score. And household income limits may be based on family size and property location,” says Merritt. How to find first-time home buyer programsAs a first-time home buyer, coming up with cash for the down payment and closing costs is one of the biggest hurdles. Luckily, there are grants and loans available to help home buyers become homeowners. The best way to determine if you’re eligible for a first-time home buyer program is to reach out to the housing authority in the town or city where you want to purchase a home. Down payment grants, tax credits, and closing cost assistance generally are not advertised, so be sure to ask around.
Many grant programs are income-based, and many require borrowers to take a homebuyer education course to learn about homeownership and mortgage borrowing. You may have to do some digging on your own to locate resources available to you. Who is considered a first-time home buyer?Anyone buying their very first home is automatically a “first-time buyer.” But repeat buyers can sometimes qualify as first-time home buyers, too, giving them access to special loan programs and financial assistance. “Under most programs, a first-time home buyer is a person who has not had any ownership in the past three years,” says Ryan Leahy, Sales Manager at Mortgage Network, Inc.
Nonprofits and local governments, which offer the majority of first-time home buyer grants, use this three-year rule to define first-time homeownership. That’s especially good news for “boomerang buyers” who owned a home in the past but went through a short sale, foreclosure, or bankruptcy. Under the three-year rule, these people have an easier road back to homeownership through first-time home buyer grants and loans. Home buying advice in today’s marketIn general, first-time buyers need to verify at least two years of income and steady employment to qualify for a home loan. Though there may be ways to qualify with less than two years of employment. Home buyers should also keep a close eye on their credit. Credit score requirements start as low as 580 for an FHA loan. But many lenders may set their own, tougher guidelines. And credit requirements may be subject to change from time to time, as we saw at the height of the Covid pandemic. “Some lenders who previously accepted a 580 credit score for an FHA loan have increased that minimum to 620 to 660,” says Randall Yates, CEO of The Lenders Network. He recommends doing all you can to get your credit in order before you apply for a home loan. To improve your credit score, try:
And remember — first-time home buyer or not, you might find lenders willing to offer some flexibility with their guidelines. Especially if you’re right on the edge of qualifying for your first mortgage, make sure you shop around and ask plenty of questions before settling on a loan. And don’t be afraid to ask questions about the qualification requirements, suggests Merritt. “If your loan professional isn’t willing to explain everything, find another lender.” Helpful information for first-time home buyersAs a first-time home buyer, you’ll learn a lot about the mortgage process as you go. But there are a few things all first-time home buyers should be aware of before getting started. Conventional loans vs. government loansConventional loans are what most of us associate with a mortgage. Backed by Fannie Mae and Freddie Mac, conventional loans typically offer low rates and affordable mortgage insurance — especially for borrowers with high credit. But many first-time home buyers end up taking out government-backed mortgage loans. These include FHA, VA, and USDA mortgages. Government backing helps lenders offer low rates and low down payment loans — even to borrowers without great credit.
Government loans are designed to help home buyers purchase or refinance a primary residence. They’re not intended for vacation homes or investment properties. It’s also important to remember the government does not lend the money to home buyers. Rather, it insures loans provided by approved lenders. Lenders offering FHA, VA, and USDA loans can apply their own underwriting criteria. This means requirements and rates vary by lender. So it’s important to shop around for your best offer. Mortgage insuranceMost home loan types require mortgage insurance if the borrower puts down less than 20%. Mortgage insurance helps protect the lender in case you default on the loan. It’s paid for by the borrower. The type of mortgage insurance depends on your loan type and down payment.
Mortgage insurance sometimes gets a bad rap, but the cost is often worth it if it allows you to secure a new home loan at today’s low interest rates. Other monthly costsYour housing costs will include more than repaying your mortgage loan and interest. Monthly mortgage payments also include:
When combined, these costs could add several hundred dollars a month to your mortgage payment — so it’s important to include them in your budget. What are today’s mortgage interest rates?A first-time home buyer grant or loan could help cover your down payment and closing costs and remove your final hurdle to homeownership. Combined with today’s low interest rates, these programs are making homeownership more accessible to first-time buyers. Start the home buying process by getting pre-approval from a mortgage lender. Pre-approval verifies your mortgage eligibility and gives you a clearer picture of your home buying budget. This step is essential for all would-be homeowners. Which loan is best for first time home buyers?FHA loans are excellent for first-time homebuyers because, in addition to lower up-front loan costs and less stringent credit requirements, you can make a down payment as low as 3.5%. 4 FHA loans cannot exceed the statutory limits described above.
What is the first step I need to do to buy a house?Step 1: Check Your Credit Score. ... . Step 2: Determine How Much You Can Afford. ... . Step 3: Choose A Lender and Get Preapproved For A Mortgage. ... . Step 4: Find A Real Estate Agent. ... . Step 5: Start The Home Search Process. ... . Step 6: Make An Offer. ... . Step 7: Get A Home Inspection And Home Appraisal. ... . Step 8: Purchase Homeowners Insurance.. What is the minimum age to buy a house in Singapore?At least 21 years old, if you're purchasing with your family members, are widowed, or orphaned. At least 35 years old, if you're single (unmarried) or divorced (no kids) At least 21 years old.
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