What first time home buyers mortgage programs exist ? The NAR, National Association of Realtors released some interesting statistics for 2017. 60% of first-time home buyers are placing down payments at 6% or less. But few adults ages 34 and younger know that buying a home is possible for 5% or less. And fewer even know about the various down payment programs on the market.
Remember I talked to you about setting goals when you’re getting ready to buy a home and learning if can you afford to buy a home? This applies to you whether you’re a first-time home buyer and or seasoned home buyer (as in you’ve traded up and down several homes already). Here’s why, understanding the types of mortgage programs help you plan towards home ownership and your life/savings goals. Yes indeed.
Let’s first go through the available first time home buyers mortgage programs:
FHA (Federal Housing Administration) program is the most popular for first time home buyers, buyers that may have less than perfect credit and/or those that want to leverage their money. In this program, buyers can place as little as 3.5% down freeing up their monies toward other things: remodeling their home, investing and/or other savings goals.
Don’t think that a 3.5% FHA loan is without cost however, because there are upfront built in fees including mortgage insurance premiums. Mortgage insurance premiums are additional fees tacked onto your monthly payments as a “penalty” for not have the full 20% down payment. But some good news on mortgage insurance premiums! They are tax deductible and when the value of home appreciates enough to make up the difference of the down payment, your lender will consider removing it. NOTE: You’ll have to contact your lender for them to start the appraisal and evaluation process.
A conventional loan is a minimum of a 20% down payment that is not guaranteed or insured by any government agency, rather the loan must meet the criteria and approval of Freddie Mac and Fannie Mae. Other types of conventional loans include: conforming loans, non-conforming loans, jumbo loans, portfolio loans (these are loan held by private mortgage lenders) and sub prime loans.
VA loans from the U.S. Department of Veterans Affairs helps service members veterans and their surviving spouses buy homes on 0% down with no private mortgage insurance. Another bonus by using a VA loan, the lending credit standards are slightly more lenient with a minimum credit score of 620. Some lenders may accept a credit score as low as 580.
The U.S Department of Agriculture has a program that provides 100% financing for rural properties.
HUD 203k Loans
For home buyers brave enough to purchase a fixer upper home, the FHA backed 203k loan program would allow you to finance the renovation.
Now that you know are aware of the different first time home buyers mortgage programs, you may want to think about how much you’d want to put down, because it does make a difference on your overall mortgage payment over the life of your loan. But before you jump and get a loan, be sure to check your credit score and learn how credit scores affect your mortgage.