First time home buyers often have access to unique benefits that repeat buyers do not. First time home buyers Loan for those who meet the necessary qualifications can potentially enjoy lower down payment costs, grants to help with the down payment and closing costs and lower monthly mortgage payments.
What is a First Time Home Buyers Loan?
A first time home buyers loan is a type of loan offered by lenders that offer unique benefits to help first time buyers afford the new home. There are also first time home buyer grants available in every state for those who qualify, which may offer financial assistance or forgivable loans.
Most of the more popular loan programs — including FHA, Conventional, USDA and VA — offer special loan benefits to first time home buyers who qualify. The benefits may vary for each person who applies, depending on the specifics of their situation. The most common benefit of the loan is a no down payment (or low down payment) home loan.
The Necessary Qualifications
The qualifications for a first time home buyers loan vary for each loan program. The most common factors that loan programs consider are:
- Percentage of the down payment
- The applicant’s credit score
- Debt-to-income ratio
- Type and location of the property
- Annual income
- Length of employment
Certain loan programs have additional requirements. For example, VA applicants must have veteran status and USDA loan applicants must apply for a home in certain approved areas. Be sure to check with the loan program you wish to pursue about their requirements for a first time home buyers loan.
Be a First Time Home Buyer
Of course, the first qualification is to be a first time home buyer. This includes anyone who has never purchased a home before. However, certain repeat buyers may also qualify for the loan program. Many programs consider a first time home buyer to be any adult who has not purchased a home in the past three years. This means previous home buyers who went through a foreclosure or home sale more than three years ago and have not purchased a new home can qualify for a first time home buyers loan (depending on the program) if they satisfy all other requirements.
Qualify for Loans and Grants
The next step is to meet all additional criteria for the loans and grants you intend to apply for. Several of the more common loan programs have the following minimum qualifications:
- FHA – The requirements for an FHA often include a 3.5 percent down payment, FICO credit score of 580 or higher and 50% or lower debt to income ratio
- Conventional – The conventional loan requirements for the loan program typically include 3 percent down, a FICO credit score of 620 or better and a maximum debt to income ratio of 43 percent
- USDA – First time home buyers interested in a USDA home loan may need a 640 or greater FICO credit score and a 41 percent or less debt to income ratio (no down payment is necessary)
- VA – VA loans do not require the borrower to make a down payment. The minimum FICO credit score is typically 580 and the buyer (or their spouse) must be an active duty service member
In addition, every state has special grants that they offer for first time home buyers to make the process more affordable. Be sure to look up the grants available within your state and take steps to ensure you qualify.
Save a Down Payment Amount
As mentioned, one main benefit is a lower down payment to help first time buyers afford the home purchase. However, the higher the down payment the buyer is able to make the more likely they are to qualify for other benefits of the loan. As seen above, most loan programs encourage a down payment of 3 percent or greater.
To use an example, first time home buyers with a less than ideal credit score may still qualify for a loan if they are able to make a large down payment (typically 10 percent or greater). For buyers with a poor debt to income ratio, having more money available in their bank account can offset the high amount of debt.
Work With The Knowledgeable First Time Home Buyers Team
Contact us today if you would like to learn more about first time home buyers loans and whether you qualify. At My Lending Pal, we take pride in helping first time home buyers get the best loan terms possible so that they can start their new journey with financial confidence and freedom.
