Are you a first-time homebuyer? If so, you’re probably overwhelmed by all the different loan options available. The good news is that there are various beneficial home loan options for first-time buyers. With that said, if you’re ready to go through a mortgage broker to find the perfect mortgage lender, check out these three loan options that are favorable to first-time buyers.
1. FHA Loans
FHA loans are insured by the Federal Housing Administration and are one of the best loan options for first-time buyers.
If your credit score is relatively low or you only want to make a small down payment, FHA loans are the perfect solution. This is because FHA loans typically require a smaller down payment compared to conventional loans and have lower credit score requirements. In fact, buyers can have a credit score as low as 580 with a down payment of as little as 3.5% of the asking price.
2. USDA Loans
Another option for first-time buyers is a USDA loan, which is a loan program 100% guaranteed by the U.S Department of Agriculture.
This loan is best for buyers who have lower to moderate incomes and are purchasing a home in a USDA-rural area. The best part about this loan is that buyers can get up to 100% financing for an eligible property, making it the perfect option for first-time buyers.
3. Fannie Mae and Freddie Mac
Another option to consider is a conventional loan that is backed by Fannie Mae and Freddie Mac. These loans only require a 3% down payment. This is ideal for first-time buyers who have a strong credit history but want to put down a minimal down payment.
To qualify for this loan, you will need a minimum credit score of 620. It’s important to note that some mortgage lenders will have different credit score thresholds. You also need to have a relatively good credit history. But this loan program does enable buyers to have a debt-to-income ratio as high as 50%, depending on the circumstances.
There are many home loan options for first-time buyers. Which one is right for you will depend on your financial situation and your needs. Always be sure to identify your goals and do thorough research to help you along your home buying journey.