First-time home buyers face moreÂ hurdles than repeatÂ buyers.
A first-time home buyer may have less savings. He or she might have a collection of student loans and other large debts. Perhaps the buyers is just starting a career. And of course, first-timersÂ have no buying experience.
New buyers may even be about to live on their own for the very first time.
According to the National Association of REALTORSÂ®, first-time home buyers account for 1-in-3 homes sold nationwide. This is the lowest rate in close to 30 years.
Yet, with mortgage rates low and an abundance of low- and no-downpayment mortgages available from mortgage lenders, there's never been a simpler time to get approved for your very first home loan.
This post is the first of a four-part series meant to help first-time home buyersÂ get approved for their first mortgage and become homeowners.Click to see today's rates (Jan 23rd, 2017)
If you can'r or don't want to buy a house with cash, you need financing -- a mortgage.
Sometimes, a bank will lend you the entire amount you need to buy a home. This is known as 100% financing.
However, most mortgages require some contribution from the borrower.
IfÂ you purchase a home for $100,000 andÂ borrow $90,000 (90%), you would put $10,000 (10%) down on the house.
As a home buyer, the size of your downpayment is up to you.
You can put upÂ twenty percent or more, or you can skip the downpayment altogether. Each choice has its benefits.
For example, when you put more money down, you borrow less money from your lender. That reduces your monthly mortgage payment.
You may also get access to lower mortgage rates.
When you make a small downpayment, you keep moreÂ cash in your savings account for life's emergencies.
It also means that you can buy a home today instead of waiting 8 years to save for a downpayment.Click to see today's rates (Jan 23rd, 2017)
As a first-time home buyer, you have access to a wide range of mortgage loans and mortgage loans can be customized to meet your needs.
Your loan amount is one of your choices.
TheÂ downpayment can be as large as you wish, or as small -- so long as you make the minimum investment required by your lender.
The five most-common low- and no-downpayment mortgages used by first-time home buyers are the FHA loan, the VA loan, the USDA loan, the Conventional 97, and the HomeReadyâ„˘ mortgage.
Each is described below.
FHA loans require a downpayment of 3.5% of a home's purchase price, at minimum.
These productsÂ areÂ popular with first-time home buyers because the program allows below-average credit scores.
FHA mortgage approval standards are considered to be the most friendly toward first-time buyers.
VA loans are available to members of the U.S. military and veterans of the Armed Services.
These mortgages provide a 100% financing option, and VA mortgage rates are oftenÂ lower than those of other programs.
Rural Housing Â or USDA loans also allow 100% financing. The program is available for homes in rural areas and less-dense suburban neighborhoods nationwide.
USDA mortgage rates are often as low as VA mortgage rates.
The Conventional 97 is available to home buyers with above-average credit scores. AÂ Conventional 97 loan allows buyers to receive cash gifts for their downpayment, which is only 3%.
This program has a loan size limit of $424,100.
The HomeReadyâ„˘ mortgage is another 3% down program. This program is geared towardÂ multi-generational households, but all home buyers are welcome to apply.
Home buyers using HomeReadyâ„˘ get access to discounted mortgage rates, and can use the income of boarders and other household residents to help get mortgage-qualified.Click to see today's rates (Jan 23rd, 2017)
First-time home buyers often cite "making a downpayment" as a primary obstacle to homeownership.
However, in addition to an abundance of low- and no-downpayment mortgages, first-time buyers have access to downpayment assistance programs (DPAs) -- many of which "grant" money instead of requiring repayment.
And the programs are widely-available, too.
According to a study from housing data company RealtyTrac, there are 78 million single-family homes in the United States, including condominiums. 68 million -- or 87% -- of these homes potentially qualify for downpayment assistance.
As a first-time buyer, therefore, you can use downpayment assistance programs to help reduce your cash required at closing; and, to reduce your monthly mortgage payment.
Strangely, less than ten percent of home buyers even apply for downpayment assistance.
Home buyers often don't apply for such programs because they're unaware that the downpayment assistance programs exist, they don't believe they'll qualify, or they plain don't know where to get access.
To find out for which assistance programs you may be eligible, talk to your mortgage lender. Most banks have applications on-hand for downpayment assistance programs, or can point you to a website.
The average downpayment assistance amounts to $11,565.
With mortgage rates low and U.S. rents rising, it's an excellent time to consider homeownership. And, as a first-time buyer, you have lots of options.
Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Click to see today's rates (Jan 23rd, 2017)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)