A person’s first home purchase is a big deal. It takes time, energy, and money. To help with the money hurdle, some people use first-time homebuyer loans. These programs vary depending but the general idea is this: first time home buyer loans give financial assistance to qualified borrowers.
First-time homebuyer loans have attractive benefits that can make purchasing a home less costly, less restrictive, and less risky for new homeowners. This type of loan is offered by the Federal Housing Administration (FHA) and by many states throughout the country.
Owning a home is a great joy and comes with many benefits. Homeownership invites owners to invest in their purchase and in the surrounding community. A house provides a safe place for a family to grow and take pride in. Not only does homeownership promote pride and responsibility, it also has a number of practical benefits for homeowners like:
The FHA defines a first-time homebuyer as someone who has never purchased a home, or who has not owned a home in three years. First-time homebuyer loans are popular because they offer benefits that other types of loans do not like: reduced interest, small down payments, deferred payments, and limited fees.
In most cases, FHA requires the homebuyer to have a credit score of at least 580 or above, along with a down payment of 3.5% of the loan amount in order to secure a first-time homebuyer loan, but many lenders require a credit score of 620 or higher to approve an FHA loan. In addition to credit score requirements, first-time homebuyers must provide documentation to prove that their debt-to-income ratio (generally a max of 41% to 43% of monthly gross income) meets lender approval.
Fewer restrictions make this type of loan perfect for first-time homebuyers. Many homebuyers pursue first-time homebuyer loans for the following reasons:
First-Time Homebuyer loans may have higher mortgage insurance requirements than other types of loans which must be paid throughout the entire life of the mortgage, unless a large down payment is made.
If first-time homebuyers want to live in an affluent area, FHA loans may not be enough to secure expensive homes. Loan ceilings differ based on the median income of the area. Interested parties should check with their real estate agent or lender to confirm loan caps.
Another limitation for first-time homebuyer loans is the requirement that the desired home is the primary place of residence. This means if a person wants to purchase a home with the intent to use it as a rental property, they most likely will not qualify for the loan.
Navigating mortgage and loan rates is complicated! Why not let our team do the hard work for you? Equity Source Mortgage is a trusted mortgage broker in Minnesota. We believe that people deserve a home to call their own. At Equity Source Mortgage, our number one goal is to match you with the best loan for you. Contact us or call us at 763-657-2000 to begin exploring your home ownership journey – YOUR Dream Is Calling!