Your Guide to First-Time Homebuyer Loans and Programs

By Right Start Mortgage
September 22, 2022

So you’re a first-time homebuyer in search of a great starter home. Congratulations! Now’s the time to cash in on exclusive loans and cash-saving programs designed just for you. To help you celebrate your induction into the first-time homebuyer club, we put together a list of some of the best homebuyer loans and programs.

Conventional Loans with Low Down Payments

If you’re looking for a conventional loan with a low 3 percent minimum down payment, we can think of four choices backed by Fannie Mae and Freddie Mac.

Conventional 97 Mortgage: This conventional loan requires a minimum credit score of 620. Additionally, applicants are required to pay for private mortgage insurance (PMI).

HomeReady Mortgage: Like the Conventional 97, this program requires a 3 percent down payment and PMI. The good news is that Conventional 97 loans come with more flexible underwriting guidelines.

Home Possible Mortgage: This mortgage is similar to the HomeReady Mortgage. The difference is that it removes loan barriers for applicants who already have another mortgage.

HomeOne Mortgage: Similar to the previous three mortgages, the HomeOne mortgage option offers a low down payment of only 3 percent. This mortgage is ideal for first-time homebuyers, and no cash-out refinance borrowers.

While Freddie Mae and Freddie Mac sponsor these first-time homebuyer loans and programs, they are only available through banks, credit unions, and other mortgage lenders.

Government Loans

Mortgages backed by federal agencies like the Federal Housing Administration, the Department of Veterans Affairs, or the U.S. Department of Agriculture are ideal for first-time homebuyers who lack resources for a traditional down payment.

FHA Loans: FHA loans are ideal for first-time homebuyers or others with weak credit scores or who cannot produce a traditional 10-20 percent down payment. While the federal government does not hold the loan, it does back it. So if you default on your loan, the FHA pays the outstanding bill. That security makes lenders more likely to approve your loan application.

VA Loans: To be eligible for a VA loan, applicants must be active or veteran military service members. More specifically, applicants must have served 90 consecutive days of active duty during wartime, 181 days during peace, or six years in the National Guard or Reserves.

VA loans are attractive because they come with competitive interest rates and zero down-payment options.

USDA Loan: USDA loans are another ideal program for first-time homebuyers living in rural areas. USDA loans are popular because the federal government finances the entire purchase price of the home without a down payment.

To qualify, applicants must:

  • Have a credit score of at least 640
  • Be able to show stable income
  • Have an adjusted household income equal to or less than 115 percent of the area median income
  • Purchase a home in a qualified rural area

Additional First-Time Homebuyer Loans and Programs

If you’re looking for additional savings, consider the following first-time homebuyer loans and programs.

Energy-Efficient Mortgage (EEM): EEMs allow borrowers to make upgrades to reduce utility costs and improve the comfort and safety of their homes during purchase or refinancing.

Good Neighbor Next Door Program: This program is available to public servants (firefighters, EMTs, teachers, etc.) who commit to purchasing a home in a HUD-designated "revitalization area" for 36 months. In exchange, homeowners receive a 50 percent discount on the home's list price.

HomePath Ready Buyer: Qualifying first-time homebuyers who participate in this program may receive up to three percent of the purchase price in closing cost assistance towards a HomePath property.

Contact the Experts

Contact the expert mortgage advisors at Right Start Mortgage for more information on first-time homebuyer loans and programs or a free personalized rate quote.

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