You want to buy a home, but feel overwhelmed at the idea of saving up 20 percent of the home’s value for a down payment. Perhaps having a not-so-great credit score is keeping you from becoming a first-time homebuyer.
Don’t worry, as a first-time buyer, you have a number of programs and options available to you, whether you don’t have enough for a large down payment or don’t have the best credit score. Here are a few options worth exploring:
Perhaps the most well-known first-time homebuyer program is loan program backed by the Federal Housing Administration. These loans aren’t specifically for first-time buyers, but it is often first timers who get the most benefit from them. There are a few instances when an FHA loan might be the right choice for a first-time buyer:
- You don’t have a large down payment saved. With an FHA loan, you can put down as little as 3.5 percent.
- Your credit score isn’t excellent or even great. Many FHA loan programs accept buyers with scores as low as 500.
- You are comfortable with the idea of paying mortgage insurance.
Freddie Mac offers a program that is usually targeted to first-time buyers. Known as Home Possible, the program allows people with low to moderate incomes or people who live in an area with higher than average costs to purchase a home with a 3 to 5 percent down payment. To qualify for the program, you can’t currently own any other property. If you are a first-time buyer, you need to complete an education requirement to qualify as well.
State Specific Programs
Many states offer programs for first-time buyers who want to purchase a home in that specific state. For example, the Georgia Dream program is designed for people buying their first home in the state, for people who haven’t owned a home for at least three years or for people buying in certain areas.
To qualify for the program, you need to invest at least $1,000 towards the purchase of your home, meet certain income and assets requirements and be purchasing a home that’s under a certain price. The program offers down payment assistance of up to $5,000 to qualified buyers.
Steps to Buying Your First Home
If you are ready to buy your first home, the first step is to get prequalified for a mortgage. Prequalification will give you a good sense of the amount you can borrow and whether a first-time buyer program makes sense for you. It might be that because of your credit history or your savings, a first-time buyer program is exactly what you need to be able to buy a home.
Once you are ready to explore your mortgage options as a first-time buyer, contact a mortgage specialist.