Save Money with the Best Home Loans for First-Time Homebuyers

  • October 5, 2022
  •   •  
  • 4 min. read time
mortgage blog, first time homebuyer, home loans

First-time homebuyers have access to top mortgage programs that can save you money and help you become a homeowner faster. So if you’re getting ready to buy your first home, keep reading! There are several advantages to being a first-time homeowner, and many people qualify, even if you’ve owned a home before. This article will highlight the benefits and the top 5 home loans that are a great match for first-time homebuyers. What’s more, you’ll find the first steps to get started.

If you’re trying to decide whether to keep renting or become a homeowner right now, you’re not the only one. A lot of homebuyers have been wondering if it’s better to wait and see if the rates come back down. Check out this article from last week if you’re trying to decide whether it’s time to stop renting and become a homeowner.

RELATED: How to get the lowest mortgage rate with an adjustable-rate mortgage (ARM)

2022 Home Loan Benefits for First-Time Homebuyers

  • Down payments as low as 0% – 3.5% down
  • Fewer income restrictions
  • More flexible credit score requirements
  • Use of gift funds to help with closing costs
  • HUD-issued grants and down payment assistance
  • Government-backed loans with lower interest rates
  • Access to withdraw IRA funds without a penalty
  • Tax deductions for points and origination fees

RELATED: How to FAST TRACK your application with a mortgage pre-approval

Top 5 Most Popular Home Loans for First-Time Homebuyers

One of the biggest obstacles for many first-time homebuyers is the down payment.

The good news is you don’t need to put 20% down to get a competitive rate on your mortgage.

In high-cost areas, the average home could be around $750k, requiring a 20% down payment of $150k. Even if you have the funds available, is it still a smart move to invest the full amount into your home? High-income buyers might want to invest that money elsewhere. And for lower-income buyers, a large down payment might not be possible.

The following mortgages are a popular option for first-time homebuyers. Why? They can help lower your down payment and get you into a house without making you cash-poor or depleting your assets.

Use this MORTGAGE CALCULATOR to find out how much you can afford right now

1. FHA Loan – 3.5% Down Payment

FHA (Federal Housing Administration) home loans are government-backed mortgages. This mortgage is a popular mortgage option for first-time homebuyers because borrowers can qualify with a lower credit score and a low down payment.

  • 3.5% down payment with a credit score of 580
  • 10% down payment with a credit score of 500
  • Flexible income requirements
  • Mortgage insurance premium (MIP) is required

2. VA Home Loan – 0% Down Payment

If you’re a member of the military, the VA home loan is one of the best home loan options for first-time homebuyers. The VA home loan is available to active-duty service members, veterans, and military spouses.

  • 0% down payment required
  • Low mortgage rates
  • Lower credit score requirements
  • Reduced closing costs
  • No mortgage insurance requirements

Find a qualified mortgage expert in your area who specializes in VA Loans

3. USDA Home Loan – 0% Down Payment

Government-backed USDA home loans offer solid advantages for first-time homebuyers who want to buy a home in a rural area. USDA home loans offer low-interest rates and no-money-down mortgages for qualified borrowers.

  • 0% down payment
  • A government-based mortgage with low-interest rates
  • Benefits to lower-income buyers
  • Lower mortgage insurance premiums

Check out the USDA eligibility map and find out which areas qualify.

4. Conventional 97 Mortgage – 3.0% Down Payment

The conventional 97 mortgage program is ideal for higher-income buyers with excellent credit that want a low 3% down payment. It’s more flexible, and you can keep your assets invested elsewhere.

  • 3% down payment
  • Opportunity to cancel PMI without refinancing
  • 620 credit score minimum
  • No limitations on areas or neighborhoods
  • No income limitations

5. HomeReady by Fannie Mae and HomePossible by Freddie Mac – 3% Down Payment

HomeReady and HomePossible are perfect for first-time homebuyers who want a conventional home loan with a low rate and a low down payment.

  • 3% down payment
  • Use gift funds for up to 100% of your down payment (HomePossible)
  • Use gift funds for your closing costs
  • Down Payment Assistance (DPA) is available for closing costs
  • You might be able to count rental income on your loan application
  • You can count income from relatives or other people living with you (HomeReady)

The Fannie Mae HomeReady home loan is also a great loan for borrowers who plan to buy a multi-unit property (up to 4 units). One of the units must be your primary residence.

Downpayment Assistance

To find out more information about downpayment assistance for 2021, along with housing grants and vouchers, check out this site for local and state-based programs.

RELATED: Talk with a local mortgage expert to find out if you’re eligible for first-time homebuyer advantages

Summary

If you’re considering becoming a homeowner right now, it’s time to take action and lock in your rate. Rates are still affordable, and these top home loan terms are favorable for first-time homebuyers. Connect with a local mortgage advisor to discuss your goals. The right mortgage can help you build financial security and put you on the fast track toward building wealth through homeownership.

Taking Action

Connect with a mortgage advisor. There are several custom loan options in addition to these top home loans for first-time homebuyers, with great mortgage rates right now. So whether you’re a first-time homebuyer or becoming a homeowner for the third time, the right mortgage can help you build financial freedom. We’d love to help.

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THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIALMORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT'S WEBSITE AT WWW.SML.TEXAS.GOV