Facebook
Twitter
Pinterest
Copy Link
Introduction
If you’re a first time home buyer, you might be feeling overwhelmed by all the different loans and programs out there. We’ve compiled an overview of some of the most common financing options available to first time buyers so that you can make an informed decision about your mortgage.
FHA Loan
If you’re a first-time home buyer, an FHA loan may be the best option for you. The Federal Housing Administration (FHA) offers loans with low down payments and more flexible credit requirements than conventional mortgages.
The minimum down payment for an FHA mortgage is 3.5%. This is much lower than the typical 20% required for conventional loans. If you can’t afford to put that much money down on your new home purchase, consider using gift funds from family members or friends–this will allow them to contribute toward your down payment without affecting their tax liability.
While some lenders require decent credit scores (720 or higher), others will approve borrowers with lower scores if they have solid income sources and assets in place; this includes car payments and student loans as well as savings accounts or 401Ks.
FHA will fund a loan for borrowers with a minimum credit score of 580 and higher if they have at least 3.5% to put down. However, ff you can make a 10% down payment, your credit score can be in the 500 – 579 range. This is a great option for borrowers with less than stellar credit.
The main disadvantage of an FHA loan is that mortgage insurance (MIP) is required for the duration of the loan. Keep in mind that once you have built up your credit score and have 20% or more equity, you can refinance into a conventional loan and eliminate the mortgage insurance,
VA Loan
VA loans are available to veterans and active duty military. The VA guarantees a portion of the loan, meaning that if you default on your mortgage payments, they will pay them for you. You don’t have to pay any mortgage insurance, either; this means your down payment can be as low as 0%.
The loan is assumable, which means that if you sell your home before paying off all of its principal balance (the amount owed on the house), whoever buys it can assume your existing loan and continue making payments on it without having to go through another application process or qualifying for financing again.
First time home buyers need to understand all their financing options.
First time home buyers need to understand all their financing options.
It’s important to research the various options and look at the pros and cons of each one, so you can make an informed decision about which one is right for you. A good lender will help you understand the different financing options, but also guide you in choosing the best option for your particular situation.
Conclusion
First time home buyers need to understand all their financing options. There are many different ways that someone can buy a house, but it’s important to know which loan is right for you. Make sure you do your research before jumping into anything!
