Best Loans for Your First Home Mortgage

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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.

Mortgage Lenders (Richmond, TX) - first time homebuyers standing in front of their new home

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.

Eligibility Criteria:

When it comes to helping first-time home buyers achieve their dreams of homeownership, we want to ensure transparency and clarity in our eligibility criteria. To qualify for our loan programs designed exclusively for first-time buyers, please take note of the following key requirements:

  1. First-Time Buyer Status: To be eligible for our first-time home buyer loans, you must not have previously owned a residential property. This includes not having had any ownership stake in a primary residence within the last three years.
  2. Credit Score: While credit score requirements may vary depending on the specific loan program, a fair to good credit score is typically required. However, we understand that everyone’s financial situation is unique, and our experienced mortgage professionals can work with you to explore options if your credit score is less than perfect.
  3. Income Verification: You’ll need to provide proof of a stable and sufficient income to support the mortgage payments. Income requirements may vary based on the loan program and the cost of the home you intend to purchase.
  4. Down Payment: Most of our first-time buyer programs offer competitive down payment options, and some may even provide assistance with down payment and closing costs. Be prepared to discuss your down payment preferences and financial capabilities during the application process.
  5. Debt-to-Income Ratio: Lenders typically consider your debt-to-income (DTI) ratio, which compares your monthly debt payments to your income. A lower DTI ratio is generally more favorable for loan approval.
  6. Residency and Citizenship: You must be a legal resident or citizen of the United States to qualify for our loan programs.
  7. Completion of Homebuyer Education: Some of our programs may require first-time buyers to complete a homebuyer education course to ensure you are well-informed about the homebuying process.

Please note that these eligibility criteria are intended as general guidelines, and specific requirements may vary based on the loan program and the lender’s policies. We encourage you to reach out to our dedicated team of mortgage experts who will be happy to discuss your unique situation and guide you through the application process, making your path to homeownership a reality.

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 - hand holding keys in front of a home

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.

The mortgage loan process with a broker generally involves several key steps. Here’s a typical sequence of events:

  1. Pre-Qualification:
    • Initial Consultation: You’ll have an initial discussion with the mortgage broker to discuss your financial goals, needs, and preferences.
    • Financial Assessment: The broker will review your financial situation, including income, credit score, debts, and assets.
    • Pre-Qualification Letter: If you meet the initial criteria, the broker may issue a pre-qualification letter indicating the loan amount you might qualify for.
  2. Loan Shopping:
    • Loan Options: The broker will present you with various mortgage loan options from different lenders, including interest rates, terms, and fees.
    • Comparison: You’ll work with the broker to compare these loan offers and choose the one that best suits your needs.
  3. Application:
    • Formal Application: Once you’ve selected a loan, you’ll complete a formal mortgage loan application with the broker. This involves providing detailed financial information and supporting documentation.
  4. Document Collection:
    • The broker will collect and review your financial documents, which may include pay stubs, bank statements, tax returns, and other relevant paperwork.
  5. Credit Check:
    • The broker will order a credit report to assess your creditworthiness, which is a crucial factor in loan approval.
  6. Rate Lock:
    • If you choose to lock in an interest rate, the broker will work with the lender to secure the rate for your loan.
  7. Loan Submission:
    • The broker will submit your complete loan application, along with all necessary documents, to the chosen lender.
  8. Underwriting:
    • The lender’s underwriting department will review your application, documents, and credit report to assess your eligibility for the loan.
  9. Conditional Approval:
    • If the underwriter approves your loan with conditions, the broker will work with you to satisfy these conditions, which may involve providing additional documentation or explanations.
  10. Clear to Close:
    • Once all conditions are met, the lender issues a “clear to close” decision, indicating that the loan is approved and ready for closing.
  11. Closing Preparation:
    • The broker will coordinate with all parties involved, including the title company, to prepare for the closing.
  12. Closing:
    • At the closing, you’ll sign all necessary documents, including the mortgage note and deed of trust. You’ll also pay any closing costs and fees.
  13. Funding:
    • After the closing, the lender funds the loan, and you become the homeowner.
  14. Post-Closing:
    • The broker may continue to assist with any post-closing issues or questions you may have.

Throughout the loan process, the mortgage broker acts as an intermediary between you and the lender, helping you navigate the complex world of mortgage lending, comparing loan options, and ensuring a smoother and more efficient process. It’s essential to communicate openly with your broker and provide all requested documentation promptly to keep the process on track.


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!