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Last updated on February 3rd, 2021 at 12:15 pm
Author at Compare Closing LLC
Amanda Byford has bought and sold many houses in the past fifteen years and is actively managing an income property portfolio consisting of multi-family properties. During the buying and selling of these properties, she has gone through several different mortgage loan transactions. This experience and knowledge have helped her develop an avenue to guide consumers to their best available option by comparing lenders through the Compare Closing business.
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To help you afford your first real estate purchase, there are many programs and grants available, which generally assisting with the down payment and closing costs.
Let us look at some of the best national grants, programs, and loans for first-time homebuyers that can help get you into your first home without needing to make a 20% down payment.
- FHA loan – Insured by the Federal Housing Administration, these loans come with smaller down payments and lower credit score requirements than most conventional loans. With a minimum credit score of 580 and a down payment of as little as 3.5% or a credit score of 500 to 579 with at least 10% down. The only hitch is if the down payment is less than 20% you’ll need to pay mortgage insurance. Since you’re paying an upfront premium and annual premiums your overall borrowing costs can be higher.
- USDA loan – Loans for some rural homes (when you buy a home in a USDA-eligible area) and borrowers can get 100% financing by the U.S. Department of Agriculture, or USDA. This doesn’t mean you have to buy a farm. These loans have income limits based on where you live and are for people who earn lower to moderate incomes. You typically need a credit score of 640 or higher to qualify for a streamlined USDA loan. Otherwise, you’ll have to provide extra documentation on your payment history to get a stamp of approval.
- VA loan – U.S. military members on active duty, veterans, and eligible family members can apply for loans backed by the U.S. Department of Veterans Affairs, or VA. Compared to most other loan types, these come with lower interest rates and don’t require a down payment. Though some service members may be exempt from paying it, a borrower needs to pay a funding fee, which can be rolled into your monthly loan costs. VA loan perks include no minimum credit score or MI requirements. And if you find yourself struggling to keep up with mortgage payments then VA can negotiate with the lender on your behalf.
- Good Neighbor Next Door – Housing aid for law enforcement officers, firefighters, emergency medical technicians, and pre-kindergarten through 12th-grade teachers are sponsored by the U.S. Department of Housing and Urban Development (HUD) in this program. A qualified participant can get a discount of 50% on a home listed in “revitalization areas.” The requirement being a borrower must commit to living in the home for at least 36 months.
- Fannie Mae or Freddie Mac – The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac set borrowing guidelines for loans they’re willing to buy from conventional lenders on the secondary mortgage market. One requires a minimum of 3% down payment, homebuyers will need a minimum credit score of 620 and a flawless financial and credit history. Fannie Mae accepts a debt-to-income ratio as high as 50 %. If the down payment is less than 20% then you need to pay for PMI, which can be canceled when your LTV ratio drops below 80%
- Fannie Mae’s HomePath Ready Buyer Program – first-time buyers interested in foreclosed homes that are owned by Fannie Mae need to take an online homebuyer education course, and if eligible, borrowers can receive up to 3 % in closing cost assistance toward the purchase of a HomePath property. As only a smaller chunk of listings of foreclosures are available it can be challenging.
- Energy-efficient mortgage (EEM) – you can get an EEM loan that’s insured through the FHA or VA programs. They let you tack the cost of energy-efficient upgrades onto your primary loan, without requiring a larger down payment.
Before seeking out first-time homebuyer programs, you need to make sure you meet the definition of a first-time homebuyer.
If you haven’t owned a home within the last three years, many nonprofit and government programs consider you as a first-time homebuyer.
No matter which program you qualify for, purchasing a home is a major financial decision and shouldn’t be taken lightly.
Reference Source: MSN Money
