Buying your first home can be exciting and overwhelming at the same time. You’re fulfilling the American dream but at the same time, taking on the largest debt of your lifetime.
Fortunately, there are many great mortgage loans for first-time homebuyers. Here are our top choices.
FHA Loans
FHA loans used to be known as a ‘first-time homebuyer’s loan.’ While today anyone can use the program, it is a great program for anyone that hasn’t owned a home before because of its flexible guidelines and low down payment requirements.
FHA loans require mortgage insurance for the life of the loan at a rate of 0.85% of the loan amount. Your insurance payment decreases each year as you pay your balance down, but you pay it for the life of the loan.
How to Qualify
Minimum 580 credit score
Maximum 43% – 50% debt-to-income ratio (may be more, case by case)
At least 3.5% of the purchase price as a down payment (can be a gift)
Stable income and employment for the last 2 years
No recent bankruptcies
Proof you’ll occupy the property as your primary residence
Conventional Loans
Conventional loans are reserved for borrowers with good credit, but it doesn’t have to be perfect. We’ve seen borrowers get approved with a credit score of 660 which isn’t in the ‘good credit’ range.
Conventional loans are different from FHA loans because you can cancel your Private Mortgage Insurance once you owe less than 80% of the home’s value. This means your mortgage payment will decrease once you eliminate PMI.
How to Qualify
Minimum 620 credit score
Maximum 36% – 49% debt-to-income ratio
At least 3% down payment (5% if you owned a home before)
Stable income and employment for the last 2 years
No recent bankruptcies
VA Loans
VA loans are for veterans that served or are serving our country. This flexible mortgage program doesn’t require a down payment and has the most flexible guidelines for veterans.
The program is only for owner-occupied properties and is a great option for veterans right out of the military looking to buy their first house.
How to Qualify
Minimum 620 credit score (this varies by lender since the VA doesn’t have a minimum credit score requirement)
Maximum 43% – 50% debt-to-income ratio (could be higher, cases by case)
No down payment required
Adequate disposable income according to your location and family size according to VA guidelines
Stable income and employment or proof of future employment if you just got out of the military
Proof you’ll occupy the property as your primary residence
Certificate of Eligibility to prove you are eligible for a VA loan
Final Thoughts
If you’re a first-time homebuyer, you have many mortgage options available to you. Each lender has different requirements and charges different rates and fees.
I’m happy to help you figure out which loan is right for you as well as answer any questions and concerns. Together we’ll make your dream of homeownership come true.
Lets chat!
Anthony Alzate
NMLS#2021422
Future Home Loans
407.373.8073
anthony@future.loans
