First Time Home Buyer Programs | How to Qualify First Time Home Buyer
Are you looking for first time home buyer programs? There are benefits to every loan program and the down payment options vary depending on the program. This article will cover first time home buyer tips and how to qualify for loan programs.
Lenders often have different underwriting standards or a tougher guideline when it comes to underwriting, called an overlay. Overlays can make the loan process and underwriting more difficult. There are some first time home buyer tips like getting properly pre-approved for a loan, working with a lender with easier guidelines, and choosing a lender with favorable terms.
First Time Home Buyer Down Payment Options
You can reach out to a experienced Mortgage Loan Originator who can help when going through the pros and cons of each loan program. First time home buyer down payment options vary and some programs do not require this to be your first time.
FHA 3.5% Down Payment
FHA mortgages are more lenient on credit and income, but have stricter guidelines when it comes to FHA minimum property requirements than conventional loans.
- For a 580 or higher FICO, the minimum down payment is 3.5%.
- For a FICO score lower than 580, the down payment is 10%.
FHA grants are also available to first time and repeat buyers depending on your credit score.
Freddie Mac’s Home Possible 3% Down Payment Program
The Home Possible loan program was designed for first time home buyers, move-up borrowers, and retirees, which require a minimum down payment of:
- 3% down payment for a 1 unit property.
- 5% down payment for a 2 to 4 unit property.
An eligible borrower must meet certain income limits with the Home Possible loan program. The Income and Property Eligibility tool can be used to determine income eligibility.
Conventional grants are also available for first time and repeat buyers, but more difficult to qualify for when it comes to credit than an FHA grant.
Freddie Mac’s HomeOne 3% Down Payment Program
Freddie Mac’s HomeOne loan program is for a first time home buyer, which do not have borrower geographic or income limits.
Fannie Mae’s HomeReady 3% Down Payment Program
Fannie Mae’s HomeReady loan program has a minimum down payment of 3%, but has income restrictions. This loan program does not require for it to be your first time buying a home and repeat buyers are still eligible. To see if you are eligible for this loan program, you can use Fannie Mae’s Area Median Income Lookup Tool.
Grant programs allow repeat buyers. Options for grant programs include:
- 3% to 6% of the total loan amount for FHA loans.
- 5% down payment assistance for a conventional loan (no repayment required).
- Power purchase 2% grant, which is 1% down payment and 2% power purchase grant with no repayment required.
When choosing a loan program, talking to an experienced Mortgage Loan Originator will help when going through the pros and cons of each loan program. Interest rates and down payment options vary depending on the program.
5 Home Buying Tips
- Even though grants are available, you should try and negotiate a seller credit to help with closing costs associated with a purchase.
- There are low down payment options, but most loan programs require private mortgage insurance unless a borrower puts 20% down or chooses lender paid mortgage insurance (LPMI).
- Determine how much you can afford before shopping for a mortgage by going through the pre-approval process and getting a pre-approval letter.
- Talk to an experienced Mortgage Loan Originator to go over pros and cons of each mortgage program.
- Choose a loan program that best fits your needs.
The mortgage industry can be even confusing to mortgage and real estate professionals, but there are plenty of resources online that can make the home buying process easier.