first-time homebuyers

Loans & Programs for First-Time Homebuyers

September 22, 2017

Because coming up with the down payment is the biggest barrier for first-time homebuyers, there are many grant and loan programs available designed to assist them. Some of these allow you to purchase a home with little or no down payment. Here are five that you might want to check out if you’re in the market for your first home:

  1. Federal Housing Administration (FHA) Loans

    Because these loans are backed by the federal government, they typically have more competitive interest rates and require lower down payments and closing costs than conventional loans. A buyer can typically qualify with a credit score that’s below 600, and can get a down payment as low as 3.5% if their score is at least 580. Lenders are more willing to give you a loan backed by the FHA with better terms because the loans are insured by the federal government if you should default on your mortgage.

  2. U.S. Department of Agriculture (USDA) Loans

    If you live in a rural area, you might be eligible for a USDA loan, and no, you do not have to be involved in farming to be eligible. These loans are usually fixed and require no down payments. You can qualify with a credit score below 640, but get much faster and simplified loan processing if your score is 640 or higher. Income limits on these loans may vary depending on where you live.

  1. U.S. Department of Veterans Affairs (VA) Loans

    Service members and their surviving spouses, including active-duty military personnel and veterans, are typically eligible for these loans. They feature competitive interest rates and do not require a down payment. Another good thing about these loans is that there are no credit score requirements.

  1. FHA Section 203(k)

    This is the ideal program for those interested in purchasing homes that need fixing up. Backed by the FHA, these loans combine the value of the home prior to improvements and the costs of the needed improvements all into one mortgage. Down payments are typically low.

  2. Fannie Mae and Freddie Mac

    These two entities, sponsored by the federal government, work with local lenders to offer affordable mortgage options for families that have low- to moderate-incomes. These options usually feature lower down payments than conventional loans and competitive interest rates, and often include homeowner education on how to responsibly manage a mortgage.

In addition to the above federal programs, many states, cities and counties offer programs to assist first-time homebuyers. Check your state and local government websites for housing and grant programs.

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