If this is your first venture into getting a mortgage, it can easily become overwhelming, daunting and confusing by all the choices and lingo. But depending on your financial situation, future plans and where you choose to buy a house, certain loans could be your better choice.
And if you need help with a down payment or closing costs or both, there’s also lots of help out there. And remember that a first-time homebuyer isn’t just someone who has never purchased a home. It can be anyone who hasn’t had a mortgage for three years or more.
“We see homeownership as an exciting and still powerful tool for building wealth and increasing family stability. That’s why homeownership is a good thing,” said Daniele Samalin, vice president of Housing Partners Network and president of HPN’s Framework, the mobile-friendly homebuyer education course.
HPN consists of 100 housing and community development nonprofits that work locally, regionally and nationally to ensure that folks get the chance to live in good home in good communities.
“There are lots of choices out there on mortgage products and lots of resource to enable them to buy a house,” she says. “Our perspective is that the 30-year fixed mortgage is a safe product. But we want to empower homebuyers to make smart choices and have all the options in front of them. One of the biggest challenges of first-time homebuyers is an overabundance of information. Our goal is to clear that clutter, help people learn what resources are available and help them to understand all the jargon that is thrown at them.”
Today’s Top First Time Home Buyer Mortgages
Here are some of the best loans available for First Time Home Buyers:
HomeReady Mortgages by Fannie Mae – “These are amazing for first-time homebuyers with good credit scores,” says Anthony VanDyke, President of ALV Mortgage in Salt Lake City. “They only require a 3% down payment (cheaper than FHA) and they have discounted mortgage insurance.”
These loans also allow funds for down payment and closing to be a personal gift, grants, employer assistance or other resources – meaning you can get a house with nothing coming out of your pocket.
Eligible home buyers can use income from non-borrowing household members, which is perfect for multi-generational homes.
HomeReady is one of today’s most sought-after low-down-payment mortgages.
Similarly, Freddie Mac offers the Home Possible Advantage program, a conventional mortgage with a 3% down payment to help more first-homebuyers jump into the market.
FHA – “If your credit score is below average, FHA loans are the best choice for first time home buyers,” VanDyke says. “The down payment is still extremely affordable, and you will have a great rate.”
The down payment is 3.5 percent, but that can come from a gift or other assistance. Remember though that mortgage insurance continues throughout an FHA loan despite after reaching 20 percent down payment. The FHA loan can be good, too, for those who had experienced foreclosures or short sales a few years ago. FHA eases the requirements to three years instead of the 7-year wait with a conventional loan – meaning after 3 years, you become a first-time homebuyer again.
VA – If you are a veteran or a current military person, the VA home loan could be a winner for you. You get the backing of the Department of Veteran Affairs who offer a zero down loan with no mortgage insurance, and the interest rates can be lower than conventional loans.
Localized First Time Buyer Programs
Special Loans from Non-Profit and HPN members – Samalin says that many organizations and HPN members provide low cost loans and great term mortgage products.
“For instance, Homewise in Santa Fe, N.M., offers really fantastic terms for homebuyers that don’t exist anywhere else,” she says. Homewise is a full-service non-profit promoting successful homeownership.
State Housing Finance Agencies’ Loans – State HFAs provided affordable mortgages to 2.6 million families to buy their first homes through the Mortgage Revenue Bonds (MRB) program, according to the National Council of State Housing Agencies (NCHFA).
“These state agencies’ mission is to get you a mortgage and promote affordable homeownership. And remember to look for assistance programs to support city workers, teachers, firemen and other professions,” Samalin says.
Not everyone wants to own a home right away.
“But for those with the dream of owning their own home, there are agencies with the purpose to get you a mortgage and promote affordable homeownership,” she says.