There are many different types of home loans for first-time buyers, and each one has its pros and cons. The type you choose will depend on your financial situation, so it’s best to consult a mortgage professional and learn more about your options.
FHA Loans
The Federal Housing Administration (FHA) offers several mortgage programs designed to help homebuyers qualify for financing. They have lower down payment requirements and less stringent credit standards, and they also offer a number of other benefits, including a no-down-payment option for borrowers with a military connection or for those buying rural properties.
VA Loans
The Veterans Affairs (VA) mortgage program is another popular choice among first-time buyers, offering no-down-payment loans for borrowers with a service-related disability or veteran status. They also offer a range of other programs, from grants for down payment and closing costs to special mortgages for people with student loans.
Conventional Loans
The largest type of mortgage available, conventional loans are backed by Fannie Mae and Freddie Mac. They’re generally a good option for first-time buyers because they have fewer requirements and can often be approved with only a 3.5% down payment.
Foreclosed Homes
Some first-time buyers might consider purchasing a foreclosure to get into the market at an affordable price. Foreclosed homes are usually in need of some major renovations and can sell at a fraction of their original value, making it easier for first-time buyers to afford them.
Fixer Uppers
If you’re looking to buy a home that needs repairs, you can turn to the fixer-upper loans offered by Fannie Mae and Freddie Mac. These loans allow you to purchase a property in need of major improvements and remodel it with one loan.
State-Sponsored Assistance
Some state governments also have programs that can help homebuyers make the transition to homeownership. Check with your state’s housing agency to see what kind of assistance is available, and be sure to use an agency-approved lender when applying.
401(k) or IRA Accounts
In addition to traditional homebuyer loans, some states have programs that are designed specifically for borrowers with 401(k) or IRA accounts. These programs often offer lower interest rates or additional cash-back incentives for those who buy with a 401(k) or IRA account.
Employer-Sponsored Programs
Most employers have a homebuyer program that helps employees buy a home through an employer-sponsored mortgage loan. If your company has such a program, contact the mortgage department to find out more about it and get information on how to apply.
Grants for First-Time Buyers
A lot of state and local governments also provide grant programs that can help a first-time buyer cover the down payment and closing costs on their mortgage. These grants are usually a lump sum that won’t have to be repaid if the buyer stays in the home for a certain period of time or meets other criteria.
These programs can reduce the upfront cost of buying a home, which can give first-time buyers more funds to spend on other things like landscaping or upgrading the kitchen.