First Time Home Buyers: 6 Loans and Programs

First Time Home Buyers: 6 Loans and Programs

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first time home buyersIt can seem daunting to shell out tons of money for your down payment and closing costs, as well as getting a mortgage. You’re in luck, however. There are plenty of first time home buyers programs and grants to make home ownership more accessible. Here are six of them that can help you achieve your home ownership goals.

1. FHA Loan

FHA loans, which are insured by the Federal Housing Administration, need smaller down payments and lower credit score requirements. First-time home buyers can buy a home with a:

  • Credit score of 580+ and 3.5% down
  • Credit score of 500 to 579 and 10% down

This is less than a majority of conventional loans.

FHA loans do have one problem: mortgage insurance. This coverage, unlike homeowners insurance, doesn’t protect you. It is for if you default on the loan to protect the lender.

2. USDA Loan

The U.S. Department of Agriculture, or USDA, guarantees loans for rural homes. You can get up to 100% financing in USDA-eligible areas. USDA loans do have income limits based on where you live. This means that the loans are geared toward people who earn lower to moderate incomes. Most first time home buyers need a credit score of 640+ to qualify for a USDA loan. You’ll need to provide extra documentation on your payment history for approval if your score is too low.

3. A Loan

Most U.S. military members, active duty and veterans, are eligible for loans that are backed by the U.S. Department of Veterans Affairs, or VA. VA loans are great for eligible borrowers since they come with lower than average interest rates and no down payment. You will need to pay a funding fee on VA loans. That fee, however, can be rolled into your loan costs. Some service members may not need to pay it at all.

Some more perks of a VA loan are that there’s no PMI or minimum credit score. The VA can negotiate with the lender on your behalf if you struggle to make mortgage payments. This can help take some stress off your shoulders.

4. Good Neighbor Next Door

The Good Neighbor Next Door program provides housing aid for:

  • Law enforcement officers
  • Firefighters
  • Emergency medical technicians
  • Pre-kindergarten through 12th-grade teachers

The U.S. Department of Housing and Urban Development, or HUD. sponsors it. It helps the people that help keep communities safe and well educated.

You can receive a discount of 50% on a home’s listed price in “revitalization areas” through the program. Use the program’s website to find properties available in your state. You will need to commit to living in the house for at least 36 months. This may not be ideal if you plan to move before that.

5. Fannie Mae or Freddie Mac

Fannie Mae and Freddie Mac are government-sponsored entities. They keep the U.S. mortgage market going strong. To qualify, they do require:

  • Minimum down payment of 3%
  • Minimum credit score of 620+
  • Relatively unblemished financial and credit history

In some cases, Fannie Mae can accept a debt-to-income ratio as high as 50%. You’ll still pay for PMI since you’re downpayment is less than 20%. You can get it canceled, however,  once your loan-to-value ratio drops below 80%.

6. Local First Time Home Buyers Programs and Grants

Many states and cities try to attract new residents by offering first time home buyers grants and programs. These grants that don’t have to be:

  • Repaid
  • Low-interest loans with deferred repayment

Some programs may have income limits. Make sure to check your state’s housing authority website for more information before buying a house.

Contact us to learn more about first time home buyers loans. We’d love to help you find the home of your dreams.

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