If you’re fed up of living in a rental, it might be time to invest in the first house you own. The first time homebuyer experience can be stressful, but a lot of the myths surrounding buying a house aren’t true.
You don’t require an outstanding credit score and you don’t require 20% down payment. A variety of first-time homebuyer programmes such as grants, loans, and down payment assistance programs can assist you in obtaining the money you need for you to buy your first house.
Federal Housing Administration (FHA) Loans
FHA loans are a great option for buyers who are first-time buyers with low credit scores or for those who don’t have the funds to put towards the down payment. The loans are guaranteed by the U.S. Department of Housing and Urban Development (HUD).
FHA Loan Requirements
If you have a credit score of at least 580, you qualify for a minimum 3.5% down payment. If your credit score is between 500 and 579, you qualify for a 10% down payment. However, you should expect to get a higher interest rate.
Here are a few other requirements:
- Maintain a steady employment record that is at minimum two years
- You’re planning to use this house as your primary residence
- You’re prepared to get an FHA property appraisal
You may be eligible to be eligible for the FHA loan program even if you have filed for bankruptcy, so long as it’s been for at minimum two years. But, you must anticipate to be required to pay private mortgage insurance (PMI). In addition, you can anticipate to pay for private mortgage insurance over the term of the FHA loan when your LTV ratio falls lower than 90% at the time of closing.
If it’s less the amount you’ll need to make payments for the next eleven years (unless the loan for your home has been paid in advance). The proceeds are used to pay the lender in the event that the borrower fails to pay the loan.
FHA loan limits differ by the area. You can find the limits of your loan here.
Energy Efficient Mortgage Program
In this program you can add the costs of energy-efficient upgrades in the amount of your FHA mortgage. It won’t affect the minimum down amount and the funds financed to fund the EEM package won’t impact the amount of your loan. You’ll need to consult with your mortgage lender in order to figure out the amount of an EEM benefit you’re eligible for.
Fannie Mae
Through Fannie Mae, you can add the costs of energy efficient improvements in the amount of your FHA mortgage. This will not alter the minimum down payment requirement and the money that you finance to fund the EEM package won’t impact the loan limit. You’ll have to work with your lender in order to figure out what amount of an EEM benefit you’re eligible for.
HomeReady Mortgage Program
The HomeReady Mortgage program is a great option for those first-time homebuyers who have a minimum credit score of 620. The minimum down amount is 3%, and PMI is mandatory. If you have a credit score of 680 or greater, you could qualify for better rates.
HomePath Ready Buyer Program
Through this program, you could receive up to 3% of the price as closing cost assistance to help with the purchase of the HomePath property. To be eligible, you’ll need to complete a homeowner education course.
There are also limitations on the items you can purchase. This program is limited to HomePath properties which are homes that have been foreclosed that are owned by Fannie Mae.
97% LTV Mortgages
This mortgage may be the right choice for first-time homebuyers who don’t have a 20% down payment. Fannie Mae’s 97% LTV mortgage only allows you to put 3% down.
You can only apply for a fixed-rate mortgage with this type of loan. The home you purchase must be your primary residence, not an investment property.
Freddie Mac
Freddie Mac is another entity that offers competitive mortgage products to consumers. Their most popular program for first-time homebuyers is the home mortgage. This mortgage is ideal for low and moderate income borrowers in underserved neighborhoods.
Home Possible Mortgages
Buyers can select from the 95% LTV ( Home Possible) or 97% LTV (Home Possible Advantage) options. This conventional loan is not backed by the federal government, but it has flexible terms and a low minimum down payment.
In addition, you can cancel PMI once the loan balance reaches 79% of the appraised value of the home. you may be able to qualify for a mortgage with 5% down even if you have no credit or bad credit.
United States Department of Agriculture (USDA) Loans
Are you considering buying a home in a rural location? You could be eligible for 100% funding through the USDA loan program.
There isn’t a requirement for a down payment for this program and the requirements for credit are significantly lower than those other lenders are looking for. You can make use of this tool on the USDA’s website to determine if your location is eligible. There’s a 2% guarantee fee with a USDA loan, but it can be rolled into your mortgage loan and spread across your monthly mortgage payments.
Veterans Administration (VA) Loans
If you are an active duty military member, veteran or surviving spouse, you may qualify for a mortgage through the VA Home Loan Program.
VA loans are perfect for first-time homebuyers because the upfront costs are very low. No down payment is required, and there is no PMI to pay.There are no minimum credit score requirements for a VA loan. However, most mortgage lenders want to see a FICO credit score of at least 580.
Native American Direct Loan
If you’re a Native American veteran looking to buy your first home, this program can help you obtain the money you need. Loans are available with no down payment, minimal closing costs, and no PMI.
They are also more affordable as compared to traditional mortgages. Your house must be within Federal Trust Land, and the mortgage is for a 30-year term at a fixed rate.
HUD’s Good Neighbor Next Door (GNND) Sales Program
Are you employed in a public service position like law enforcement, teaching or fire department? You can get 50% off the appraised value of homes by participating in the HUD GNND Sales program.
The only condition is that the house must be situated in a revitalization area and you must be able to live there for a minimum of 36 months. It is also important to be quick as homes are listed for sale within a seven-day period.
HUD Dollar Homes Program
First-time homebuyers should take a look at Dollar Homes available through HUD. These foreclosed properties have been sitting on HUD’s website for over six months. The options may be limited, but you never know when a good deal will come along.
HUD 203(k) Rehab Loans
Are you set on an affordable fixer-upper? Look into the HUD 203(k) loans which are insured by the FHA and offer additional funds for homebuyers looking to finish their renovations. Instead of taking out another loan, you could roll the costs of your renovation into your mortgage.
Other Homebuyer Grants and Programs
You can go to the HUD website to find out more about the programs offered to first-time buyers within your region. Once you’ve picked your state, you’ll then be directed to the list of programs you could qualify for.
National Homebuyers Fund
The National Homebuyers Fund (NHF) is available for homebuyers with low incomes who require payment assistance. Once you find a participating lender, the NHF will provide a grant for up to 5% of the loan amount.
You don’t need to repay the grant, however there are requirements for income in relation to the current housing market and your area. Your lender can provide more details and help determine if you’re eligible.
Employer-Sponsored First-Time Home Buyer Programs
Certain employers are now offering housing incentives to help employees with down payments and closing costs. Your employer or union may give you a grant that will be forgiven over time. Check with your manager to see if they offer any kind of down payment or closing cost assistance.
Local Grants to First-Time Home Buyers
There are numerous local or state government grants that are available to first-time homebuyers. Many of them do not require any repayment if you are within your house for a certain time frame. Contact an agent for real estate and inquire with both your county and state to find out more about the options open to you.
