First Time Homebuyer Programs

First Time Homebuyer Programs

Buying a home can be complicated and knowing which loan program is right for you can be a challenge.  If you are a first time home buyer or an applicant in need of a no money down home loan there are many programs available to you. Every loan program has different requirements for credit, income and the property you plan to buy. We will go over each program in detail to help you better understand your options. 

The best home loan programs for first time home buyers in 2019 are FHA, USDA, VA, and Home Possible. All three programs offer little to no down payments, low-interest rates, and flexible credit requirements. 


USDA home Loans

USDA developed a loan program for first time home buyers in rural areas. Backed by the Department of Agriculture,  the money is guaranteed against default. Because of this, the bank can lend you 100% of the sales price with only a minor risk of loss. USDA pays a portion of the loan if the bank incurs losses from foreclosure so that banks are more willing to lend you money.


Benefits of USDA Loans

  • Home buyers can finance 100% of a home’s purchase price; and, can even use the loan to help purchase a manufactured home or a modular home. 
  • USDA mortgage rates are typically lower than the rates for FHAVA, and conventional mortgages via Fannie Mae and Freddie Mac.
  • USDA first time home buyer loans can be big money-savers and they are available to first-time home buyers as well as repeat home buyers. Homeownership counseling is not required to use the USDA home loan program.
  • Most closings can happen in 45 days or fewer
  • The USDA will not guarantee a mortgage for a household which exceeds its maximum income limits for a given area. This is because USDA home loans are meant to promote homeownership among households of “modest means” only. The national average is $80,000 annually. To learn more about your area’s income limits, give us a call or complete the form below. .

FHA Loan Program

FHA financing works similar to USDA because HUD backs/guarantees the loan offered to minimize any losses the bank could potentially have. These loans are a great program for first time home buyers with damaged credit and have the lowest interest rates available. 

Loans backed by the FHA typically require a 3.5% down payment to purchase a home however, there are many grant or bond programs available to provide the funds needed for a down payment. Every first time home buyer program has positives and negatives so be sure to discuss this with your mortgage professional. 
FHA also has minimum property standard and the home you are purchasing will be inspected thoroughly to make sure you are moving into is safe and livable home. Although FHA first time home buyer loans do not offer a warranty for the condition of a home, they do take every possible step to ensure the home you are purchasing isn’t a money pit. 


Benefits of FHA

  • An FHA loan only requires 3.5% down and the seller is allowed to pay your closing costs with seller concessions
  • Offers first time home buyers the lowest interest rates in the nation.
  • Loans backed by FHA have flexible credit guidelines and perfect credit is not always needed to buy a home
  • Closing costs can be financed by including seller concessions in the sales contract.
  • The down payment can be a grant or gift. There are many not for profit entities that often gift or grant down payment funds to home buyers.  

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VA Loans

VA is the best loan program available in today’s market. They offer 100 percent financing, low-interest rates, and no monthly mortgage insurance.  A VA loan payment is typically 5-10% less than other programs.  You must have served in the military and met certain requirements during your time served to qualify for a VA Home Loan.


Who Qualifies for VA Loans

The VA home loan works similar to FHA and USDA in that the Department of Veterans Affairs guarantees the loan and banks are more likely to lend money because there is little risk of loss. The program was originally created to offer long term financing to eligible veterans or their surviving spouses. VA now offers financing opportunities for Veterans in locations where financing was not readily available.


History of VA Loans

By guaranteeing mortgages, VA opened up lending in the rural communities that needed it most. The original Servicemen’s Readjustment Act was passed by Congress in 1944 and offered a variety of benefits to America’s veterans. One benefit was the authorization of the VA to guarantee or insure home loans. By guaranteeing home loans, banks were not taking risks by offering 100% financing to eligible veterans. Having a common-sense approach to underwriting, VA has the least amount of defaults out of all the offered loan programs. I personally attribute this to the sense of responsibility acquired as a member of the military and the great clients we get to work with.


Home Possible By Freddie Mac

This Freddie Mac loan program offers first-time buyer options with flexible credit underwriting. Home Possible provides help to low-income borrowers and helps them realize the dream of owning a home.

Home Possible only requires a down payment of only 3 percent and has more options to responsibly increase homeownership for borrowers. handymen can use sweat equity to assist in meeting their down payment and closing costs. Co-borrowers who do not live in the home can be included for a borrower’s one-unit residence. First time home buyer applicants are permitted to own other properties with competitive pricing and the ease of a conventional mortgage.

Benefits of Home Possible Loans

  • Low Down Payment requirements
  • flexible credit guidelines
  • Creative sources for a down payment
  • Cannot make more money than the median income limit for the area.
  • Less strict on property condition as the program is technically a Conventional loan.


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