Top 5 Mortgage Home Loans for First-Time Home Buyers

First-time home buyers have access to a lot of mortgage programs so if you’re getting ready to buy your first home, congratulations! Maybe you’re getting ready to make an offer or just doing your research. We’ve got you covered either way. Keep reading to discover some great benefits available to first-time home buyers and see if you qualify.

Related: Find out if you qualify as a first-time homebuyer

2021 Mortgage Benefits for First-Time Home Buyers

  • 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
  • IRA funds can often be withdrawn without penalty
  • Tax deductions for points and origination fees

As a first-time homebuyer, this could be a great year. Keep reading to learn more about the most popular home loan options available today.

Top 5 Most Popular Home Loans for First-Time Homebuyers

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

But you don’t need to put 20% down to get a good rate on your mortgage. In high-cost areas, this means the average home could be around $750k and you’d need to put a down payment of $150k.

Even if you have that much to put down, is it still the best idea to put it all into your home? For high-income buyers, you might want to keep that money invested somewhere else. For lower-income buyers, this down payment might not be possible.

These popular first-time homebuyer mortgages are designed to help lower your down payment and get you into a house without massive fees or unexpected costs.

1. FHA Loan – 3.5% Down Payment

FHA (Federal Housing Administration) home loans are government-backed mortgages. These mortgages are one of the most popular mortgage options for first-time homebuyers because they accept lower credit scores and have a low down payment requirement.

  • 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, this is one of the best home loan options for first-time homebuyers. A 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

3. USDA Home Loan – 0% Down Payment

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

  • 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 what areas qualify.

4. Conventional 97 Mortgage – 3.0% Down Payment

The conventional 97 mortgage program is designed for higher-income buyers with higher credit ratings who want a low 3% down payment. It’s more flexible in some ways and you can keep your assets invested elsewhere.

  • 3% down payment
  • Opportunity to cancel PMI (private mortgage insurance) 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 government-backed mortgages that are ideal for first-time homebuyers who want a conventional home loan with a low rate and a low down payment.

  • 3% down payment
  • Gifted funds can be used for up to 100% of your down payment (HomePossible)
  • Gifted funds can be used for your closing costs
  • Down Payment Assistance (DPA) can be used 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 can also be used to buy a multi-unit property (up to 4 units) as long as at least one of the units is your primary residence.

Additional Resources

Find out more information about downpayment assistance and housing grants for 2021. For information on vouchers, state programs, and even foreclosures in your state.

Taking Action

Be prepared while you shop for your next home and check in with a mortgage expert to see if you qualify as a first-time homebuyer. Start the process now and ask your lender to show you which home loan programs will give you the best advantages. We can help.