First Time Home Buyer Loan Options & Mortgage Programs
When you get serious about buying your first home, one of the first decisions you’ll make is the type of loan that's right for. You'll have to think through your budget, current finances, down payment and other costs while making this decision. Some mortgages are backed, or insured, by government agencies like the Federal Housing Authority (FHA), while others are tailored to particular kinds of buyers. there are specific loans for people in the military, or homebuyers opting for a fixer-upper in the area where they want to live.
So how do you know which is the right choice for you? Here’s a breakdown of the major types of mortgages. If you already know which home loan is right for you, you can start your journey to homeownership by applying today!
Can first-time homebuyers get conventional mortgages?
A conventional mortgage, also known as a traditional mortgage, is a loan that isn’t backed by a government agency like the FHA, USDA or VA. This means that you won’t have to meet any special criteria or pay an upfront mortgage insurance fee.
Consistently the most popular option available to homebuyers, the terms never change so you’ll pay the same monthly payment throughout the life of the loan. In August 2020, 82% of mortgages were conventional.
But that doesn’t mean they’re easy to get—they often have stricter requirements than other loan types. To qualify, most lenders will want to see borrowers meet minimum FICO score requirements and have a debt-to-income ratio of 43% or less. In return, borrowers may be able to qualify for a mortgage rate that's lower than the national average.
Are FHA home loans a good choice for first-time homebuyers?
FHA home loans are backed by the Federal Housing Administration. These loans are administered by lenders that have been specially approved by the FHA.
FHA loans area generally geared toward first-time buyers. They’re also typically easier to qualify for than conventional mortgages. Since lenders have the reassurance of a government organization backing the loans, they’re taking on less risk and can be less strict with requirements.
Lenders usually look for minimum FICO score requirements or higher and a DTI ratio of 50% or less. FHA loans are often available with low down payment options.
Is it possible to get a VA home loan on a first home?
VA home loans are available to active or retired members of the U.S. military and certain qualifying relatives. These loans are backed by the Department of Veterans Affairs. However, you must be approved and receive a certificate of eligibility from the VA in order to secure this type of loan.
VA home loans share some of the same benefits as FHA home loans. Advantages include more lenient credit requirements and looser rules surrounding DTI.
But one aspect that makes VA home loans particularly unique is the fact that a down payment is not required—customers put down no money at all in about 90% of VA home loans.
Can a first-time home buyer get a USDA home loan?
Backed by the United States Department of Agriculture, your prospective home must be located in a qualifying rural area. The home must also serve as your primary residence.
This program, like the FHA and VA home loan programs, aims to make home ownership more affordable for more Americans. USDA home loans have income limits—generally your household income can be no higher than 115% of the median income for the area.
Is it possible for a first-time homebuyer to get a Renovation loan?
Renovation loans can be a great option for a buyer who doesn’t have the budget for a turnkey property. This type of home loan allows you to roll the money you need for home improvements into the mortgage balance. This way, you'll pay for the renovations simultaneously with your monthly payment.
Fannie Mae HomeStyle renovation mortgages are conventional mortgages that can be used for both home purchases and refinances of an existing mortgage. FHA 203(k) renovation loans must fall within the FHA mortgage limit for the area.
How can a first-time home buyer start the home loan process?
Do you want to learn more about mortgage types and other aspects of the home loan process for first time homebuyers? Take a look at our detailed first-time homebuyers guide and get all the info you'll need to navigate your way to your first mortgage.
Are you ready to get moving towards homeownership? If you feel like you're ready to start the mortgage process, apply online today to get started!
Rate, Inc. is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the Nevada Department of Veterans Services, the US Department of Agriculture, or any other government agency. No compensation can be received for advising or assisting another person with a matter relating to veterans’ benefits except as authorized under Title 38 of the United States Code.