First-time home buyer loans and requirements

Table of Content

• FHA Energy Efficient Mortgage
• Which Type of Mortgage Is Right for You? FHA, USDA, and Other Loan Options
• CHILLY TIMES
• How do I compare mortgage lenders?
• What is the best mortgage for first-time home buyers?
• How can I boost my chances of getting a mortgage?
• #1 Make Sure You Know Your Credit Score
• Research mortgage lenders

There are also programs available to help eligible buyers cover some or all of their down payment and closing costs. Our mortgage loan officers are a great resource for helping you understand your options. Conventional fixed-rate loans are one of the most common types of home loans.

But you’ve got a few more steps to take before the process is complete. We’ll find you a highly rated lender in just a few minutes. Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. You can’t get first-time homeowner benefits if you own a rental or investment property, even if you don’t live in it.

FHA Energy Efficient Mortgage

Your employer may give you a grant or a loan that’s forgivable over time, and your labor union might also offer closing assistance. A down payment is a large initial expense when you buy a home, and it’s required for most types of mortgages. Fortunately, many lenders accept down payment assistance, which can help you cover the upfront costs of a down payment.

Because of this guarantee, credit requirements are generally looser than other types of mortgages, and down payments can be as low as 3.5%, even with a relatively low credit score. While there are a few drawbacks to FHA loans, especially when it comes to costs, they can be a great way for buyers who don't have stellar qualifications to become homeowners. It’s important to consider the benefits of different first-time home buyer loans before deciding which option is right for you.

Which Type of Mortgage Is Right for You? FHA, USDA, and Other Loan Options

Some have served in the Armed Forces and can access VA loans, while others might be able to explore USDA financing if their homes are in certain rural areas. Remember, the average rate may not be the one you qualify for. Depending on your financial situation, a lender may offer a rate that’s higher or lower than the average. So, it’s a good idea to do things like boosting your credit score and paying down high-interest debts. In a rising rate environment, it’s a good idea to shop around for lenders to see who can offer the best rate.

A section just for military borrowers that asks for details about your military service. A gifts and grants section to list who the gift is coming from and how it’s getting to you.

CHILLY TIMES

This results in a lower monthly payment than with a conventional loan. After the interest-only period ends, the borrower pays both the interest and principal. An interest-only mortgage may be a good option for people who move every few years, or who are buying a home as a short-term investment. Different from a fixed-rate mortgage, an adjustable-rate mortgage has a stable interest rate for a set period of time (for example, the first five or seven years of a 30-year loan). After that, the rate will adjust based on market conditions .

Getting approved for an FHA loan is one of the easiest ways to get a home today. Pay down your debt -Try and cut down your existing debt before applying for new credit as lenders may be reluctant to lend to you if you already have a large amount of debt. The first is an affordability check, which is how lenders decide if you'll be able to make your payments on top of your other expenses. Once you’ve selected a fixed, variable, discount or specialist mortgage, you can start looking at your likely rates.

How do I compare mortgage lenders?

Learn how to qualify for a mortgage in 2023 before working with a lender with our detailed overview of the minimum mortgage requirements by loan type. A loan-to-value ratio measures the percentage of your home’s value that you’re borrowing in a mortgage. Your LTV ratio may affect your interest rate, how much you can borrow and your monthly payment. Lenders divide your total debt by your pretax income to determine your DTI ratio. It’s an important measure used to determine whether you can repay the loan. The “qualified mortgage” rule recommends a DTI ratio at or below 43%.

To apply for an FHA loan, you must find an FHA-approved lender, which may include banks, credit unions, and online lenders. A mortgage broker can also help you locate an FHA-approved lender that works with financial and credit profiles similar to yours. While the first-time homebuyer tax credit was eliminated at the federal level in 2010, several states still offer state tax credits for first-time homebuyers. Additionally, some municipalities and counties offer property tax reductions for first-time homebuyers in their first year.

For example, some state-level housing finance agencies offer Individual Development Accounts , which might contribute three dollars for every one dollar the borrower saves. Those who qualify work with an assigned counselor to deposit funds into an IDA over a specified period of time. If the borrower follows the plan and saves the required amount, they’ll receive the match at closing. First-time homebuyers can more easily afford a home with the help of down payment assistance , which is a sum of money given as either a grant, second mortgage or matched savings. USDA loan – The U.S. Department of Agriculture guarantees loans for some rural homes for up to 100-percent financing (in other words, there’s no down-payment requirement). This doesn’t mean you have to buy a farm or shack up with livestock, but you do have to buy a home in a USDA-eligible area.

However, most homebuyers — if they can afford it — would save money in the long run with a conventional loan. A lender may offer conventional mortgages with either a fixed rate or adjustable rate . Interest rates are typically lower than those of other loan types. Although similar in name, a preapproval shouldn’t be confused with a prequalification.

Interest-only loans are a type of ARM in which you only pay mortgage interest and not principal during the introductory period until the loan reverts to a fixed, principal-paying loan. However, because you pay no principal during the initial period, the balance due on the loan does not change until you begin to repay the principal. In most cases, VA loans are easier to qualify for than conventional loans. Lenders generally limit the maximum VA loan to conventional mortgage loan limits. Before applying for a loan, you’ll need to request your eligibility from the VA.

Your mortgage lender may require a home appraisal to make sure you’re not paying more for the home than it’s worth. In addition, you will typically order a home inspection to ensure the home doesn’t require costly repairs. Once your mortgage lender has the required documents to verify your information, you can usually expect to hear from your lender within the same day, or up to 3 business days.

#1 Make Sure You Know Your Credit Score

NASB offers conventional loans for as little as 3% down. A shorter term — for example, 15 years instead of 30 years —may result in savings because interest accrues over a shorter time with a quicker payoff. Mortgage lenders may offer lower interest rates for shorter terms. An FHA loan is a fixed-rate or adjustable-rate mortgage with an interest rate that’s determined by the lender .

Our editorial team does not receive direct compensation from our advertisers. A mortgage prequalification gives you an estimate of how much you can borrow, but it doesn't require a credit pull or in-depth information. A preapproval, on the other hand, requires a full mortgage application along with supporting documents and a hard credit pull. A prequalification can help you determine your budget but isn't as convincing as a preapproval.