Best Loans for Your First Home Mortgage

The Best Loans for Your First Home Mortgage

As a first-time homebuyer, you might feel like you’re behind the curve when it comes to the intimidating new world of home financing. The reality couldn’t be further from the truth. If you have never purchased a home before, you have access to a host of options for first home mortgages for which other homebuyers don’t qualify. FHA loans, VA loans, and USDA loans are just a few of the home mortgage options available to you as a new homebuyer.

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Do You Qualify for a First Home Mortgage?

A first-time homebuyer is someone who has never owned a home before. While that is one way to define it, you might be surprised how liberal the definition of “first-time” is in some programs. For example, the United States Department of Housing and Urban Development (HUD) defines first-time homebuyers as someone who hasn’t owned a principal residence in the last three years from the date of purchase of the new property.

Of course, there are other definitions, such as single parents who only owned a home with their former spouse when they were married. Programs have expanded significantly in recent years to include more and more types of new homebuyers.

FHA Loan First Home Mortgages

A subsidiary of U.S. Housing and Urban Development, the Federal Housing Administration, or FHA, is the single largest insurer of residential mortgage loans in the world. The FHA guarantees mortgage loans to mitigate lenders’ risk. In other words, if you default on your first-time mortgage, the FHA will reimburse your home lender.

An FHA loan is often desirable to new homebuyers who don’t have much of a down payment saved. The reason is it ensures first-time home loans with down payments as low as 3.5%. Even if you have a foreclosure or bankruptcy in your past, you may still qualify for an FHA loan.

So what do you need to qualify for this type of first mortgage? Here are the requirements for FHA mortgages:

  • A credit score of 580 or more.
  • At least a 3.5% down payment.
  • Debt to income ratio of less than 43%.
  • Pay mortgage insurance premium (MIP).

VA Loan First Home Mortgages

The United States Department of Veterans Affairs, or VA, offers both VA direct and VA-backed loans. The list of benefits that come with VA home loans is substantial, especially if you’re a first-time home purchaser. VA loans offer advantages like no down payment, no private mortgage insurance (PMI), lower interest rates, more flexible credit requirements, and limits on closing costs.

What it takes to qualify for a VA loan depends on when you served. For example, if you’re on active duty now, you only need 90 continuous days of service. If you served from the Gulf War to now and are not on active duty, you will need 24 continuous months. If you meet the criteria for your service period, the VA will give you a certificate of eligibility (COE) that you show your lender as proof that you qualify. You’ll also need to meet your lender’s income and credit criteria to qualify for a VA mortgage.

Buying a House for the First Time | Rock Mortgage

USDA First Home Mortgage Loans

A United States Department of Agriculture (USDA) home loan is a no-down-payment mortgage available to qualifying rural homebuyers. The program, known as the Rural Development Guaranteed Housing Loan Program, offers three options. The first is a guaranteed loan, similar to those through the VA and FHA, that lets you access the lowest interest rates through an approved local lender with no down payment. However, keep in mind that you will have to pay a mortgage insurance premium if you put little or no money down.

The second option is a USDA direct loan. These loans are for low-income borrowers only, and the household income cutoffs will depend on where you’re buying. When you factor in government subsidies, rates for USDA direct mortgages may be as little as 1%.

The final options are home remodeling loans and grants. With these loans or cash awards, you can renovate or improve an existing home. The USDA also allows you to combine grants and loans up to $27,500.

Fannie Mae and Freddie Mac: Conventional First Home Mortgages

Fannie Mae and Freddie Mac both work with local mortgage lenders to provide a variety of conventional home loans. Many require minimal down payments, making them especially attractive to first-time buyers. Freddie Mac has a program called HomePossible that requires a down payment of just 3%. HomePossible is geared toward first-time homebuyers and has an income ceiling of 80% of Area Median Income (AMI).

Fannie Mae’s HomeReady program is also designed for lower-income borrowers with minimal down payments. Borrowers must have a credit score of at least 620 and a down payment of at least 3%.

With so many first mortgage options, it’s easy to find the right loan for your income, down payment, and budget. Now that you’re equipped with the financing basics, you can start searching for the home of your dreams.


First Time Home Buyers Houston

The Best Loans For Your First Home Mortgages | Rock Mortgage — Houston, Texas

Billy Evans

Billy Evans

Billy Evans is a Loan Officer at Rock Mortgage. As a father and family man Billy understands the importance and want to have a beautiful home to raise and grow a family in. That is why he has made it his mission to help everyone get the best mortgage solution possible to fit their financial needs. Billy is also a former United States Marine, as a Veteran himself and mortgage professional he has combined his knowledge and experience to passionately serve Veterans. When Billy isn’t working, he enjoys spending time with his wife, daughter, and their puppy Ollie!