Buying your first home is a huge milestone. One that’s exciting but can also be very overwhelming and stressful.
Most likely, if you are going to buy a home, that means taking out a home loan (aka a mortgage). Getting a mortgage for a first time home buyer can sometimes be challenging.
If you’re young and don’t have a long credit and/or job history, traditional lenders may see you as more of a risk. And some may not be willing to give you a loan for the amount you want. Or give you a loan at all.
Fortunately, there are a number of good options and programs out there for first time home buyers looking for financing.
Here are some financing options to check out if you are a first time home buyer.
Financing Options For First Time Home Buyers
There are many types of home loans out there and each has its own set of pros and cons. And you may not be eligible for all of them. So here are the common options for mortgages:
The FHA or also known as Federal Housing Loans, is part of the U.S. Department of Housing and Urban Development (HUD) that provides many mortgage programs for Americans. They are the go-to house financers for first-time buyers.
They are also great for people who have lower credit scores and want to pay low down payments. For first-time buyers, they can purchase a home even with a credit score of 580.
You can even make a down payment as low as 3.5 percent. But if there is one downside, you have to pay mortgage insurance if your down payment is less than 20 percent.
The U.S. Department of Veterans Affairs provides Veterans Affairs loans or VA loans.
The VA are not the ones making the loans here. Rather, they guarantee home loans from qualified lenders. This is a benefit for veterans that allows them to purchase a house with beneficial terms.
VA loans are mainly available to former and current military personnels and their spouses. VA loans have low interest rates and do not have a down payment.
Instead, you will need to pay the required funding fees. There is also no minimum credit score.
United States Department of Agriculture, or USDA loans are applicable if you are looking to purchase a home in a USDA-eligible area. They are great for people who earn low-to-moderate incomes.
To qualify for a streamlined USDA loan you will need a credit score of 640 or higher.
Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac are conventional loans great for people who are looking for a 3 percent down payment. They are often sold in the secondary mortgage market.
But eligibility is strict for these conventional loans. For example, you will first need a credit score of 620 and an unblemished financial and credit history to qualify for either loan.
You will also pay private mortgage insurance if you are paying less than 20 percent down payment.
Good Neighbor Next Door
What was once known as the Teacher Next Door Program, the Good Neighbor Next Door loans have expanded. They now include law enforcement, firefighters and emergency medical technicians.
These types of loans offer 50 percent off on home prices as long as they are located in revitalization areas.