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Loans for First-Time Home Buyers

Established 1999
16 March 2023 by Northwest Mortgage
If you’re looking to qualify for a loan for your first home, you’ve got great options

Congratulations - you’re looking to buy your first home! It’s a worthy goal - buying your first home is the first step towards building a stable financial future for yourself and your loved ones.  

The current market (and the buying habits of corporate parties), may have some young home buyers scared. If housing is so expensive, how can I compete with companies that pay cash? And how can I possibly save 20% of a down payment with inflation the way it is AND with wages remaining low? By getting a loan that’s tailored to your situation!

Many parties, including the federal government, want to support young people buying homes instead of renting, so there are many ways they attempt to subsidize that behavior. One of those is providing unique loans and opportunities that let prospective first-time home buyers compete with that company that’s been using cash offers to vacuum up properties.  

Below are a few loans for first-time home buyers.

FHA loan

The Federal Housing Administration (FHA), part of the Department of Housing and Urban Development), has provided home loans to new home buyers since 1934. This is one of the most common loans for many kinds of buyers, especially first-time home buyers. 

The biggest advantage to an FHA loan is that your down payment can be as little as 3.5% of the price of your prospective home. In addition, these loans are some of the best loans available for someone with marks on their credit history: you can still score a loan with a credit score of 580. Loans can be made to those with lower credit scores, but the down payment percentage required increases proportionally. 

The downside is that, if you pay less than the 20% down payment, you will need FHA mortgage insurance. That is something to discuss with an FHA-approved lender, which you can find using the directory here

Low-rate conventional loans

If you’re not looking to borrow from the feds, then several conventional loan types are available with low interest rates and/or low down payments. For most of these loans, Fannie Mae and Freddie Mac will be the backers. They can be found at many regular banks, credit unions, and mortgage companies. 

The restrictions and exceptions for these loans are varied - for some, you might have to be comfortable with a 30-year mortgage, as opposed to a shorter one (such as for the HomeReady loan from Fannie Mae). For others, you might only be able to apply the loan to a primary residence (ex, Home Possible loan from Freddie Mac) or to a selection of previously foreclosed homes (like Fannie Mae’s HomePath Ready Buyer mortgage). 

There’s lots of options, so do your research and consult with mortgage professionals to find a loan that fits your situation. 

Specialized loans

In addition to the above, there are many kinds of specialized loans for people in certain professions (such as veterans, teachers, etc.) or for those who are looking to own homes in a certain area. 

Here’s a quick rundown of some of these loans:

  • VA loans - provided by Veterans Affairs, these loans tend to offer lower interest rates and no down payments. As expected, they are only available to veterans and their families.

  • USDA loans - if you’re looking to purchase a rural home in a USDA-approved area (which often means farmland and livestock responsibilities), then a USDA loan might be for you. Since the USDA guarantees the loan, you can get low to no down payments.

  • Good Neighbor Next Door program - if you or your partner’s job and location qualifies for the Good Neighbor Next Door program, you could qualify for 50% off the list price of the home. Learn more about the program here.

  • State-specific loan and assistance programs - many states have down payment assistance programs or loan programs specific to the needs of first-time home buyers. So do some research about your state’s specific loan programs! You may be surprised to find some resources that are available.

As always, all of these loans come with certain restrictions and caveats. Contact us to set up your appointment and get pre-approved for your loan today!