Best Mortgage Loans For First Time Buyers
Financing is always a big question mark when searching homes for sale, especially for first-time buyers who may not realize that all loans are not created equal and that not all lenders offer every type of loan.
Getting Started With A Mortgage
The right loan could make a big difference in many ways, including the down payment, the number of years on the loan, closing costs, and mortgage insurance.
Getting approved for the right type of loan could save a first-time home buyer thousands of dollars and free up money that can then be invested in home improvements or new furniture.
Types of Mortgages
Rural Development Loans (RD)
RD loans are mortgages backed by the U.S. Department of Agriculture (USDA) and are part of the USDA Rural Development Guaranteed Housing Loan program. USDA loans are designed to assist first-time home buyers with below-average incomes.
They offer 100% financing with reduced mortgage insurance premiums and feature below-market mortgage rates. 97% of the geographic United States is in USDA loan-eligible territory.
FHA Loans
The FHA is an agency of the U.S. Department of Housing and Urban Development. It offers loans with less rigorous lending standards and lower down-payment requirements, making them popular with first-time buyers.
FHA loans are insured and require borrowers to have mortgage insurance. The security provided by the mortgage insurance allows lenders to offer FHA loans at attractive interest rates and with more flexible qualification requirements.
FHA loans offer both fixed-rate mortgages and adjustable-rate mortgages.
- An adjustable-rate mortgage has a variable interest rate that can change throughout the loan’s life. It differs from a fixed-rate mortgage in that the rate may move up or down.
- A fixed-rate mortgage is the most common mortgage available. As the name suggests, the interest rate on a fixed mortgage does not change during the entire duration of the loan.
Veterans Affairs (VA) Loans
Many veterans have taken advantage of VA loans to purchase their first home. One big advantage is they do not always require a down payment. Loans are made through private lenders and guaranteed by the Department of Veterans Affairs.
There is no minimum credit score, however, lenders generally have their own requirements and most will expect a credit score of 620 or higher. Some may go lower, but will most likely charge a higher interest rate.
The guidelines are usually more flexible than those for conventional loans. VA loans can only finance a primary home. They cannot be used to purchase or refinance vacation or investment homes.
Do Your Homework Before Deciding
As a first-time buyer, it is important to understand the various loans and programs available and how mortgage rates work and fluctuate.
A loan quote only lasts a period of time, so be sure you are ready when the opportunity for that dream home arises. Contact a local Realtor today who can help you through the process.
If you have a home to sell to purchase your next property, you may want to review our Discount Real Estate Brokerage options for getting your home sold cheap so you can apply more of your earned equity towards your new home.
