If you’re a first time homebuyer, figuring out how to buy your first home can be tricky. Luckily, there are several first time homebuyer programs available to you that you can utilize for financial assistance.
FHA Loan Program.
Federal Housing Administration (FHA) loans are specifically geared towards first time homebuyers. With an FHA loan, you can take out a loan with a down payment as low as 3.5%. This down payment can be gifted by relatives, and doesn’t even have to originate from the homebuyers. It’s easier to qualify for FHA loans than conventional loans because both credit standards and income requirements are more lenient. Additionally, rates are often lower for FHA loans than conventional loans, therefore catering to first time homebuyers who might not have as much money as second or third time homebuyers. FHA loans are often assumable and are easier to refinance than conventional loans.
The downside to FHA loans is that there is often a cap on how much of a loan you can take out. Therefore, FHA loans in high-cost areas are often times hard to come by. Another downside is that you have to pay private mortgage insurance (PMI) for the lifetime of the loan. The reason for this is that FHA loans are high risk due to the lenient qualification requirements, and your lender needs to be protected.
VA Loan Program.
Veterans Affairs (VA) loans are geared towards first time homebuyers who are veterans of the armed services or are currently on active duty or the reserves. Widows of veterans are also eligible to apply. VA loans are similar to FHA loans in the sense that there are looser qualifications. Also, there is usually no minimum down payment requirement and no private mortgage insurance required. There are limits on how much of a loan you can take out, but these limits are fairly generous and can cover higher-priced houses.
HUD Loan Program.
HUD loans are geared towards a very specific population of first time homebuyers. HUD loans are for low-income buyers in rural areas. You’ll have to talk to your mortgage lender to see if you qualify for a HUD loan, because not all properties can accept HUD financing, even if you’re a low-income buyer in a rural area. Like the other first time homebuyer loans, rates are often very low and qualification requirements are extremely lenient.
