s a first-time homebuyer, it can be more difficult to get a mortgage, especially if you do not have a good credit score and savings to cover down payments. However, the good news is there are various mortgage options available for first-time homebuyers.

Here are seven options you will want to check out.

1. Conventional Mortgage Loans

Conventional mortgage loans are not insured or guaranteed by the federal government. Typically, they come with fixed rates.

While conventional mortgage loans are usually less expensive than loans that the federal government guarantees, they are also difficult for many first-time homebuyers to qualify for.

To be eligible, you will typically need a high credit score, a low debt-to-income ratio, and a large down payment. You would need to take out private mortgage insurance too.

2. FHA Loans

Federal Housing Administration loans are usually easier to qualify for than conventional mortgages. Also, down payment amounts are typically lower and FHA loans have less strict credit requirements.

Therefore, they can be good options for first-time homebuyers. However, the main downside of FHA loans is that you have to pay a mortgage insurance premium, which would be included in your mortgage payments.

3. Down Payment Assistance Programs

There are other loan options for first-time homebuyers. For instance, you could qualify for a Down Payment Assistance program via a specific type of loan, such as a deferred payment loan.

You could then reduce the amount of your down payment. Seeing as the down payment is often the main stumbling block that first-time homebuyers encounter, DPA loans could be very beneficial.

You may even qualify for a DPA grant, which you do not have to repay. Check with your local or state government to find out more about first-time homebuyer DPA programs.

4. Closing Assistance Programs

Similar to DPA programs, there are also private and government-sponsored programs that can help first-time homebuyers with paying closing costs.

Typically, closing costs are between 2% and 6% of the total cost of your mortgage. You could get closing cost assistance through either a grant or a loan. 

5. The HomePath® Ready Buyer™ Program

First-time homebuyers have the opportunity to purchase foreclosed properties for as little as 3% down if they go through Fannie Mae’s HomePath® Ready Buyer™ program.

The main drawback of this option is that foreclosed properties often need repairs done, so you will probably need to spend additional cash before your new home is fully habitable.

But it can still be cheaper to go with this program compared to other first-time home buying options, and you can always spread the cost of repairs over time.

Furthermore, with the HomePath® Ready Buyer™ program, you could get up to 3% of your closing costs back.

Also, bear in mind that this program is only available to first-time homebuyers who permanently live in the houses they buy.

6. The Good Neighbor Next Door Program

If you are a firefighter, an emergency medical technician, a pre-K-12 teacher, or a law enforcement officer and you want to buy your first home, you could benefit from the Department of Housing and Urban Development’s Good Neighbor Next Door program.

You could receive a 50% discount off selected HUD foreclosed homes.

7. U.S. Department of Veterans Affairs Loans

If you are a veteran, you could get a mortgage with favorable terms by applying for a VA loan, which is operated via the U.S. Department of Veterans Affairs.

While the department does not handle loans itself, it can guarantee mortgages from qualified lenders. Veterans can then obtain home loans with favorable terms. For example, usually, a down payment is not required.

You may be limited as to the properties you can purchase, but it is usually easier to qualify for a VA loan than a conventional mortgage and you can potentially save a lot of money.

Feb 19, 2023