Benefits for First Time Home Buyers

Buying a home for the first time can be intimidating. There are many things to consider, and it is not as easy as choosing homes to view and selecting your favorite. Many first-time homebuyers lack a sizeable down payment. If you meet first-time home buyer qualifications, you can unlock many rewards and benefits that include down payment assistance, low to no down payment requirements, grants, and more. 

When buying a home, you will have to go through the typical underwriting process and qualify for a home loan. Mortgage companies check several factors to ensure you will be able to afford your home. You will be eligible as a first-time home buyer with the standard qualifiers if you have not owned or co-owned a home within the last three years. To qualify for a home loan, you will need to meet specific criteria, and they may vary based on the mortgage company. 

Credit score – If you have a higher score, it shows that you are a better money manager and a more responsible borrower. The higher the score, the more access to loan options and the lower your interest rate. 

Down payment – The more you save for your down payment, the better mortgage deal you will be offered. Some loans come with low down payment options of 3% of the purchase price, while you may qualify for some loan programs with no down payment.

Reliable Income – You will need to show your mortgage lender that you have a stable income that allows you to pay your mortgage comfortably.

Debt to income ratio – Your debt-to-income ratio shows lenders how much your income is taken by other commitments, including credit card or debts or alimony or child support. 

These criteria are the main things lenders look at when purchasing a home either as an existing homeowner or a first-time homeowner. Before shopping for a home, it is always a good idea to consider prequalification before house hunting. Prequalifying a lender will look at all your assets, including your income and debts, advise you on what you qualify for, and give you tips on improving your chances for qualifying for more.

First Time Home Buyer Programs

As a first-time home buyer, there is a lot of information to cover. You will want to start with the prequalifying, but once you are past that step, you are ready to begin preparing for purchasing your first home. You will need to consider the many programs and benefits available to you as a first-time home buyer. There are many options for assistance with down payments and closing costs. There are charitable and government-sponsored programs that will help you with many of these often-high costs, and there are education programs available that can help you through the process.

Down Payment Assistance

Down payments are among the highest upfront costs when purchasing a home, and many people use down amounts to hold them back from owning a home. The truth is some many grants or loans allow a lower down payment. There are down payment assistance programs that offer more strict guidelines for first-time home buyers to qualify. 

Grants 

Many grants are offered at the state and local level and are outright sums of money given to first-time homeowners without the obligation of paying it back. You can look to your city and county government or your state housing finance authority to find grants available for you. You can find assistance through The U.S. Department of Housing and Urban Development.

Forgivable Loans – These loans are a zero-interest second mortgage that homeowners will not have to pay back if they stay in the home for a predetermined amount of time. 

Deferred Payment Loans – These loan conditions vary, but there is no payment on the down-payment and closing costs until the house is sold, the house is refinanced, or the home is paid off. 

Low-Interest Loans – A lender may allow you to take out a second mortgage to cover the cost of the down payment, and you will have to make payments along with your regular mortgage payment.

Government-Backed Loans 

A government-backed loan allows you to purchase a home even with a lower credit score or a low-down payment. These loans are insured by the government, posing fewer risks to the lenders. These loans offer lower interest rates. 

FHA Loans – An FHA loan is backed by the Federal Housing Administration under the Department of Housing and Urban Development. FHA loans are an excellent option for first-time home buyers because lenders can accept lower down payments and the acceptable credit score is lower than many others. An FHA loan requires a minimum down payment of 3.5% and a credit score of 580. 

USDA Loans – USDA loans are backed by the U.S. Department of Agriculture and are zero down payment mortgages for home buyers. There are three USDA home loan programs.

• Loan Guarantees: The USDA guarantees a mortgage through a participating lender and allows you to get a low-interest rate and no down payment. 

• Direct Loans: These mortgages are for low-income households, and income thresholds vary by region.

• Home Improvement Loans and Grants: These loans allow homeowners to repair or upgrade their homes, and these packages can combine a loan and a grant with up to $27,500 in assistance.

To qualify for a USDA backed loan, you need to have a dependable income for at least 24 months, your monthly payment has been to no more than 29% of your monthly income, your debts cannot exceed 41% of your monthly income, a good credit history, and you must be a U.S. Citizen or a permanent residence. 

V.A. Loans - V.A. loans are backed by the U.S. Department of Veterans Affairs and benefit active duty or veteran service members or surviving spouses. You can qualify for a V.A. loan if

• you have been on active duty for at least 90 days

• a veteran that meets the length of service requirements of 90 days in wartime and 181 days in peacetime

• completed 90 days of active-duty service or six years in the Reserves or National Guard

• you are a surviving spouse of a veteran who died while in service or from a service-related disability.