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First-Time Buyer Home Loans

Buying a home for the first-time is a serious and exciting undertaking. For many first-time home buyers, it can be difficult to save up a large down payment and or have enough income to qualify for a move-in ready home. Fortunately, there are plenty of first-time home buyer loan programs that help borrowers overcome these hurdles to homeownership.

FHA Loans

Backed by the Federal Housing Administration, FHA loans are great for first-time buyers because the down payment requirement can be as little 3.5% for those with FICO credit scores of at least 580. And because the federal government is guaranteeing a portion of the loan, lenders are willing to widen their credit standards, making them among the most popular home loans for first-timers. Borrowers should be aware that FHA loans require mortgage insurance premiums (insurance to protect the lender) for the life of the loan, though. With traditional loans, mortgage insurance can be canceled after the buyer reaches 20% equity in the home. FHA borrowers will have to pay that extra fee until the loan ends.

VA Loans

For service members, veterans and surviving spouses, VA loans (guaranteed by the U.S. Department of Veterans Affairs) are a sweet first-time home buyer deal. In many cases, there is no down payment, mortgage insurance, or even loan limit requirement. The main qualifications include sufficient income and adequate debt ratios. 

USDA Loans

For first-time buyers looking to buy in rural areas, the U.S. Department of Agriculture backs USDA loans from approved lenders. Because the USDA guarantees up to 90% of these loans, some lenders will allow borrowers to finance up to 100% of the purchase price and the interest rates can be extremely low. There may be some income restrictions in certain areas, however.

Good Neighbor Next Door Program

Originally designed as a loan program to help teachers, this loan now also serves firefighters, law enforcement and emergency medical personnel. These borrowers can receive discounts of up to 50% on market prices of homes in revitalization areas. Buyers do have to live in the home for at least three years, but it can be an excellent way to break into the real estate market as minimal cost. This is a HUD-sponsored program and the approved houses are listed exclusively on the Good Neighbor Next Door website.

Fannie Mae and Freddie Mac Loans

Fannie and Freddie are government-sponsored entities charged with making homeownership accessible to more Americans. They each offer loan programs great for first-time home buyers, with down payments as low as 3%. Private mortgage insurance can be canceled after the loan-to-value ratio falls to 80%. Both loans require credit scores of 620 or above.

Home Renovation Loans

For those first-time buyers who are willing to take a chance on a fixer-upper, there are several programs that can help make renovations affordable. 

  • 203k Loan – Offered by the FHA, this loan allows borrowers to take out extra money, in addition to the actual mortgage loan, to be used for renovations. All the funds are rolled into one home loan.
  • FHA Energy Efficient Mortgage (EEM) – If the property is old and energy-outdated, the FHA EEM loan can provide a mortgage plus additional funding for energy efficient improvements, like new insulation or solar panel system installation. The home will first need an energy audit and rating by a qualified auditor. 

State Specific Home Buyer Programs

Most states also sponsor their own programs to make home-buying easier for first-timers. Many of these are down payment grants or assistance. Check state websites for details on the specific first-time home buyer programs offered.