Making the leap from renter to home owner is a huge one. Perhaps you would like to own a home but fear you will not be able to afford a first time home buyer loan. While that is certainly a reasonable concern, you may not realize that several loan programs exist to help people purchase a home for the first time. BrightPath Mortgage recommends checking out the ones we highlight below at a minimum.
Freddie Mac or Fannie Mae First Time Home Buyer Loan
Freddie Mac and Fannie Mae are entities sponsored by the government that negotiate with local lenders to offer affordable mortgages to people with a moderate or low income. The backing of these government programs makes it possible for lenders to offer significantly reduced interest rates and a down payment as low as three percent. As part of its loan programs, Freddie Mac and Fannie Mae offer education for first-time homeowners through a program that it calls HomePath Ready Buyer.
The FHA First Time Home Buyer Loan
The FHA insures mortgage loans to help reduce the risk to lenders so they can make home loans available to more people. The FHA, a division of the United States Department of Housing and Urban Development (HUD), assumes the risk of a homeowner potentially defaulting on the loan. The FHA loan offers competitive interest rates, lower closing costs, and smaller closing costs compared to a conventional loan.
The FHA makes an especially attractive first time home buyer loan if you have a credit score of 580 or above. After qualifying for the loan, you could make a down payment as low as only 3.5 percent of the purchase price of the home you want to buy. The down payment requirement is 10 percent for borrowers with a credit score lower than 580.
The United States Department of Veteran Affairs (VA) loan is available to you if either you or your spouse are active duty or retired military personnel. You can also qualify for a VA loan if your deceased spouse served in the military. Lenders can offer special features not available on another first time home buyer loan since the VA guarantees at least part of the loan. These benefits include:
- Competitive interest rates
- No down payment required
- No minimum credit score required
- No requirement to pay private mortgage insurance (PMI)
- The VA will negotiate for affordable payments on your behalf if you have difficulty paying your mortgage due to illness, job loss, or another common reason
As much as you might want to buy a new home, your budget will only allow for a fixer-upper at this time. Section 203(k) of the Federal Housing Administration (FHA) recognizes that supporting people willing to upgrade vacant homes is good for communities and the economy. With this FHA-backed program, the government considers how much the value of the property will increase after you make the needed improvements. It then allows you to borrow this amount and includes it as part of your primary mortgage. Your down payment requirement can be as low as three percent.
BrightPath Mortgage is happy to help you evaluate these and other loan options to determine which one is right for you. Contact us today!