If you’re new to the whole house-hunting game, it can be a daunting process indeed. One of the most challenging issues that first-time home buyers face is almost certainly finding the right mortgage for them and their needs. Thankfully, there are several different types of mortgages available for people buying their first property. Here are some of the best types of loans for first-time home buyers.
The Federal Housing Administration is always a great place to begin looking for great mortgage loans for first-time buyers. Loans associated with the FHA come with guarantees that make mortgage lenders feel less apprehensive when approving a loan for a first-time buyer. Note that these guarantees don’t mean you’ll automatically be approved - instead, it means that if you default on your loan, the FHA reimburses the lender, thus reducing their exposure to risk.
FHA-guaranteed loans do have some requirements. First, you need to meet the income guidelines set by the agency in order to qualify. Additionally, you’ll need to pay a mortgage insurance premium, which can increase your monthly costs slightly. However, for anyone with a lower credit score, the FHA program is a godsend - especially since down payment requirements are as low as 3.5 percent.
If for any reason you’re uninterested in an FHA loan, there are conventional mortgages you can pursue. The so-called “97” loan is one of them, so-called because it only requires a 3 percent deposit in order to qualify. This makes 97 loans similar to FHA loans in a number of ways, making them a good alternative, though there are some important differences to keep in mind:
Between FHA loans and conventional 97 loans, there are other options available to you as well. For US armed services veterans, for example, the Department of Veterans Affairs offers VA mortgages that are ideal for first-time buyers due to lowered closing costs, little to no down payment requirements, and no ongoing mortgage insurance. Meanwhile, if you’re looking to move to a rural area, the USDA offers low-cost loans as well that offer many of the same benefits as these other programs.
Choosing the right mortgage for you is obviously going to depend on your own finances and circumstances. Finding one that matches your needs, and your capabilities, will take some time and effort on your part. In general, however, the best way to get an excellent deal on a first-time home buyer loan is to save as much as you can for a down payment and work on improving your credit history. Together, these can help ensure you receive attractive terms like lower interest rates.