Like every dream worth having, the journey to becoming a homeowner isn’t always easy, but it’s worth it! From the paperwork to the down payments, confusing financial jargon, etc. Thankfully for first-time homebuyers, there are a number of loan programs to make buying a home easier.
In this article, we are going to briefly overview a few types of loan programs that are available to homebuyers today. We hope that in doing so, you will be able to arm yourself with the knowledge needed to fund your dream home.
Conventional Loans:
Conventional Loans are great for first-time homebuyers, as they allow borrowers to put a down payment as low as 3%. Also referred to as Fannie Mae and Freddy Mac, these programs are not insured by the federal government and typically require a minimum credit score of 620 and a debt-to-income ratio of at least 50%.
Government Loans:
The most common government loans are FHA, USDA and VA Loans.
FHA Mortgage Loans are ideal for borrowers with less than perfect credit, or who do not have a sizable down payment saved up. This may even be a great option for black homebuyers and minority homebuyers who statistically have less savings than Whites (due to the unequal wage gap). However, there are FHA Mortgage Loan requirements. With this loan, borrowers need a minimum FICO score of 580; however, credit scores of 500 can still be approved with a minimum down payment of 10%.
The other government loan is a USDA loan. This program is typically for moderate to low-income borrowers who live in rural areas. The USDA loan requirements are that the borrower must be a U.S. Citizen and have a minimum credit score of 640, with dependable income and solid repayment history. USDA Loans are attractive because they tend to offer low-interest rates with no money own.
The last government loan is a VA Loan. This loan can either be VA direct or VA-backed and eligibility requirements are that the borrower either be a Veteran or a military service member on active duty. VA loans offer service members and their families low-interest mortgages without a down payment or property mortgage insurance. Closing costs are also usually covered by the seller.
Renovation Loans:
Want to purchase a fixer-upper? A renovation loan might be for you. This loan includes the cost of the home, plus the estimated cost of the renovation. There are several renovation loan programs available to buyers. A few options for renovation loans include a 203K FHA Loan, a CHOICERenovation loan by Freddy Mac or the HomeStyle Renovation Loan by Fannie Mae. Eligibility requirements vary for each loan program.
Other:
There are hundreds of loan programs available to borrowers, even borrowers with special circumstances. Ask our loan officers what niche products they have available. These can include bank statement loans, investment property loans, loans for the self-employed, and more.
We hope this brief guide serves you well and gives you more insight into how to purchase your first home. If you are interested in starting your journey to homeownership today, please reach out and speak to one of our loan officers today! Call us at (844) 466-3669.
