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The 8 best mortgage lenders for first time home buyers

Peter Warden
The Mortgage Reports editor

The best mortgage lenders for first time home buyers in 2020

We chose 8 best mortgage lenders for first time home buyers in 2020.

These lenders were picked for their strong customer service scores and exceptionally good deals for first time buyers — from low rates and fees, to cash grants that help cover down payments.

Compare options to see if one of these lenders is right for you.

Find the right lender for you (Oct 28th, 2020)
Mortgage Lender Standout Feature Minimum Credit Score Average Loan Fees (as % of Loan Amount)1
Guaranteed Rate Down payment grants 580 1.25%
PrimeLending Closing cost assistance 580 1.81%
Better Mortgage $0 fees and transparent pricing 580 0%
Flagstar Bank Down payment grants 580 1.52%
New American Funding Considers credit as low as 500 500 1.84%
CitiMortgage Low rates 640 0.74%
Caliber Jumbo loans with 5% down 580 1.65%
Veterans United* Helps veterans build credit 660 1.47%

*Only serves veterans, military members and their families

Find the right lender for you (Oct 28th, 2020)

Editor’s note: The Mortgage Reports may be compensated by some of these lenders if you choose to work with them. However, that does not affect our reviews. See our full editorial disclosures here.


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The best mortgage lenders for first time home buyers

Purchasing a property is often scary, even for those who’ve done it several times before. But working with a great mortgage lender can make the process a lot smoother — especially if you’re new to home buying.

We chose the eight lenders below because they offer special perks that could improve your first-time home buyer experience.

Their benefits range from great service to low rates, down payment assistance, and beyond.

  1. Guaranteed Rate
  2. PrimeLending
  3. Better Mortgage
  4. Flagstar Bank
  5. New American Funding
  6. CitiMortgage
  7. Caliber Home Loans
  8. Veterans United

1. Guaranteed Rate

Guaranteed Rate is a tech-first lender with low fees, great customer reviews, and broad portfolio of loans — which includes VA and USDA mortgages.

Guaranteed Rate plays nicely with third-party down payment assistance programs (DPAs), so you shouldn’t run into any snags if you’re using grant or loan money toward your down payment.

And Guaranteed Rate even has its own DPA program. Its ‘Give 2 You’ program offers those who’ve already saved 3% of the purchase price a grant of up to $2,000, which can be used for closing costs or added to the down payment.

Guaranteed Rate rates and requirements:

  • Average 30-yr mortgage rate in 20192: 4.12%
  • Median loan costs: $4,121
  • Minimum FICO credit score: 580
  • Minimum down payment: 3.0% [0% for VA or USDA loans]
  • Average customer reviews score3: 4.6 out of 5
  • Complaints per 1,000 mortgages4: 0.15

Guaranteed Rate also ranked highly in our review of the best online mortgage lenders.

2. PrimeLending

A 2020 survey by The Scotsman Guide ranked PrimeLending no. 7 nationally for consumer mortgage volume.

PrimeLending works well with state and local down payment assistance programs.

And it, too, has its own version: NeighborhoodEdge® Closing Cost Assistance. That offers up to $2,000 for qualified homebuyers, though the home you’re buying must be in a low-to-moderate income census tract area.

PrimeLending rates and requirements:

  • Average 30-yr mortgage rate in 2019: 4.36%
  • Median loan costs: $4,581
  • Minimum FICO credit score: 580
  • Minimum down payment: 3.0% [0% for VA or USDA loans]
  • Overall customer reviews score: 4.6 out of 5
  • Complaints per 1,000 mortgages: 0.14

We like PrimeLending’s high customer satisfaction scores and low customer complaint numbers.

Interest rates look a little higher on average, but rates vary so much by customer that PrimeLending will have great deals for some. You’ll need to see a personalized rate quote to find out how it compares for you.

3. Better Mortgage

You have to love Better Mortgage‘s low rates and zero loan costs. If dollars and cents are your main concern, it should be on your shortlist of lenders from which to ask for a quote.

Note that Better’s website makes no mention of down payment assistance. So, if you’re relying on a DPA, you need to check whether Better Mortgage will play ball.

Better Mortgage rates and requirements:

  • Average 30-yr mortgage rate in 2019: 3.89%
  • Median loan costs: zilch, nothing, zero
  • Minimum FICO credit score: 580
  • Minimum down payment: 3.0% [no VA or USDA loans]
  • Overall customer reviews score: 4.3 out of 5
  • Complaints per 1,000 mortgages: 0.27

One other benefit of working with Better is that you can customize your rate online without handing over any personal information.

Its site will show you how various rate and fee offers break down, so you can better understand your options. Very few lenders are this transparent about pricing.

Get mortgage rates from Better Mortgage today, October 28, 2020

4. Flagstar Bank

Flagstar Bank offers mortgages in all 50 states, and operates physical branches in Michigan, Indiana, California, Wisconsin, and Ohio.

You may choose Flagstar Bank as your mortgage lender for its impressive down payment assistance and its good reputation for customer service.

Flagstar Bank rates and requirements:

  • Average 30-yr mortgage rate in 2019: 4.28%
  • Median loan costs: $4,184
  • Minimum FICO credit score: 580
  • Minimum down payment: 3.0% [0% for VA loans; no USDA loans]
  • Overall customer reviews score: 4.5 out of 5
  • Complaints per 1,000 mortgages: 0.18

The Flagstar Gift Program gives qualifying buyers up to $2,500 toward their down payment or closing costs.

And Flagstar is especially generous to first time home buyers in its home state of Michigan. Some purchasing in Detroit and the wider state of MI could be in line for up to $7,500 of assistance.

5. New American Funding

New American Funding (NAF) is a strong all-around lender with a reputation for excellent customer service and low rates.

But NAF’s outstanding characteristic is that it will consider applicants with credit scores as low as 500.

New American Funding rates and requirements:

  • Average 30-yr mortgage rate in 2019: 4.16%
  • Median loan costs: $4,848
  • Minimum FICO credit score: 500 (for FHA loans)
  • Minimum down payment: 3.0% [0% for VA and USDA loans]
  • Overall customer reviews score: 4.9 out of 5
  • Complaints per 1,000 mortgages: 0.14

Note NAF’s stellar customer reviews and low number of complaints, which are the best in our survey.

6. CitiMortgage

CitiMortgage is for those with decent credit who like a great deal. It offers attractive rates and fees. As you’ll have guessed, it’s a division of Citigroup, Inc, the huge global bank.

CitiMortgage rates and requirements:

  • Average 30-yr mortgage rate in 2019: 3.80%
  • Median loan costs: $4,032
  • Minimum FICO credit score: 640
  • Minimum down payment: 3.0% [0% for VA loans; no USDA loans]
  • Overall customer reviews score: 4.5 out of 5
  • Complaints per 1,000 mortgages: 0.61

Those customer complaint numbers are a bit higher than other lenders on this list. But still, fewer than 1 complaint per thousand customers is nothing to scoff at. And for the lowest average mortgage rates on the list, it may be a fair tradeoff.

7. Caliber Home Loans

Caliber is a relative newcomer, coming into existence in 2008. It’s grown quickly, partly because of its personal service backed up by innovative technology.

Caliber rates and requirements:

  • Average 30-yr mortgage rate in 2019: 4.15%
  • Median loan costs: $4,771
  • Minimum FICO credit score: 580
  • Minimum down payment: 3.0% [0% for VA and USDA loans]
  • Overall customer reviews score: 4.4 out of 5
  • Complaints per 1,000 mortgages: 0.21

Caliber has an unusually broad selection of mortgages. Those include HomeOne, a product tailored for first time buyers that allows 3% down and credit starting at 620.

But Caliber’s standout product is its jumbo loan offering.

For first time home buyers who need to borrow more than conventional loan limits allow — which is currently $510,400 in most areas — this lender may be a good option. Caliber offers mortgages up to $2.5M with just 5% down payment.

8. Veterans United

As its name implies, Veterans United specializes in mortgages for veterans, service members, and others who are eligible for VA loans.

Veterans United seems to excel in this arena; it’s currently the biggest VA loan lender in America.

Veterans United rates and requirements:

  • Average 30-yr mortgage rate in 2019: 4.0%
  • Median loan costs: $3,666
  • Minimum FICO credit score: typically 660
  • Minimum down payment: 0% for VA loans
  • Overall customer reviews score: 4.7 out of 5
  • Complaints per 1,000 mortgages: 0.15

Note the relatively high credit score requirement. That might bar entry for some people.

But, if you have lower credit and are having trouble qualifying for a mortgage, Veterans United might be able to help.

Its Lighthouse program offers free credit counseling for veterans, to bring their score up to where it needs to be to buy a home.

Get mortgage rates from Veterans United today, October 28, 2020

First time home buyer loan programs 

So those are our picks for the best mortgage lenders for first time home buyers.

But what about the mortgage itself? Along with choosing a lender, you have to choose the type of loan you’ll use to finance your home purchase.

There are countless mortgage types out there. And of course, all first time home buyers have unique needs.

But most buyers find what they are looking for with one of these four programs: the FHA loan, Conventional loan, VA loan, or USDA loan.

FHA loans

FHA loans are partly guaranteed by the Federal Housing Administration (FHA). They’re incredibly popular with first time home buyers, offering benefits like:

  • Minimum down payment as low as 3.5%
  • Low credit score requirement starting at 580 and up, though some lenders set their own standards
  • Flexible requirements for income and debt
  • The ability to cover your down payment with gifted or granted money

The main drawback of an FHA loan is that you’re stuck with mortgage insurance, usually for the life of the loan. But many FHA homeowners can refinance to get rid of that burden later on.

Overall, FHA loans are great for those with slightly iffy credit and/or small down-payment savings. They’re generally easier to qualify for than any other loan type.

Verify your FHA loan eligibility (Oct 28th, 2020)

Conventional loans

Conventional loans (a.k.a. “conforming loans”) are usually backed by Fannie Mae or Freddie Mac. They conform with Fannie and Freddie’s rules, hence their nickname.

Conventional mortgages offer:

  • Minimum down payment of 3%
  • Minimum credit score of 620, though lenders get to set their own thresholds
  • You can stop paying mortgage insurance once your mortgage balance is less than 80% of your home’s market value

Fannie Mae HomeReady and Freddie Mac Home Possible loans are examples of these. And they may bring extra benefits, such as counting rent from a roommate toward your income.

Verify your Conventional loan eligibility (Oct 28th, 2020)

USDA loans

USDA mortgages are partly backed by the US Department of Agriculture (USDA). And you must buy a home in a “rural” area to qualify. But 97% of the map of America is designated as rural, so many are surprised to find themselves in luck.

A USDA loan has benefits like:

  • Zero down payment
  • Competitive mortgage rates
  • Much smaller mortgage insurance payments than most other loans
  • Only available to those with average (max. 115% of the median) or below-average household incomes

If you want to buy somewhere in a place that counts as rural (and that includes some smaller towns), these can provide amazing bargains.

Verify your USDA loan eligibility (Oct 28th, 2020)

VA loans

These mortgages are backed by the Department of Veterans Affairs (VA). And, if you’re a veteran, someone with an honorable discharge, or are still serving, it’s highly likely this mortgage will suit you best. Because VA loans offer:

  • Zero down payment
  • Low mortgage rates
  • No continuing mortgage insurance
  • Easy credit threshold
  • Low closing costs

If you are eligible, you’d need to be in highly exceptional circumstances not to find a VA loan your best bet.

Verify your VA loan eligibility (Oct 28th, 2020)

First time home buyer grants 

Many first time home buyers are shocked to find out that down payment assistance actually exists.

Down payment assistance (DPA) programs offer money toward your down payment and/or closing costs. Often, this money comes in the form of a grant or loan that doesn’t have to be repaid.

There are more than 2,000 down payment assistance programs nationwide, so chances are there’s at least one operating near you.

Each DPA gets to set its own benefits and eligibility criteria. But, if you’re lucky with the ones in your area, you might receive a home buying grant worth thousands of dollars.

If you qualify for a down payment assistance program in your area, you might receive a home buying grant worth thousands of dollars.

Other DPAs offer low- or zero-interest loans. Some require you to repay those in parallel with your mortgage. But others require no payment until you move. And many forgive your loan, providing you stay in residence in the home for x years.

One important note: Your lender has to be willing to work with a DPA program for you to be able to use the funds.

Almost all the best mortgage lenders for first time home buyers we’ve chosen are happy to work with DPAs. Indeed, a couple offer their own down payment assistance.

So take a little time to find out what’s available where you want to buy. You can start here: Down payment assistance programs in every state for 2020

More resources for first time buyers

Buying your first house can seem overwhelming at first. But it doesn’t have to be. You can find an awful lot of help and support to guide you through the process.

If you’re still in the ‘researching’ phase, here are a few of our favorite first time home buyer tools and articles:

Once you choose a lender, you should receive plenty of guidance from your mortgage loan officer.

And, if you choose a good buyer’s agent (a real estate agent who works on your behalf but who’s typically paid by your seller), you’ll have another fountain of knowledge.

Recap: The 8 best mortgage lenders for first time home buyers

Here’s a recap of the best mortgage lenders for first time home buyers and why we chose them:

  • Guaranteed Rate — Offers down payment grants
  • PrimeLending — Offers closing cost assistance
  • Better Mortgage — $0 fees and transparent pricing
  • Flagstar Bank — Offers down payment grants
  • New American Funding — Considers credit starting at 500
  • CitiMortgage — Lowest mortgage rates on average
  • Caliber Home Loans — Jumbo loans starting at 5% down
  • Veterans United — VA loans and credit improvement help

Every mortgage lender offers different rates and programs. So get custom quotes from your top picks to find out which one has the best deal for you.

Verify your new rate (Oct 28th, 2020)

1Average loan fees come from self-reported data mortgage lenders are required to file publicly under the Home Mortgage Disclosure Act. Your own loan fees will vary

2Median interest rates come from self-reported data mortgage lenders are required to file publicly under the Home Mortgage Disclosure Act. Your own mortgage rate will vary

3Average customer review score includes ratings filed with J.D. Power, Zillow, and/or LendingTree, depending on availability of these scores for each lender

4Number of complaints per 1,000 mortgage customers reflects the number of official complaints registered with the Consumer Financial Protection Bureau, compared to the lenders total mortgage originations in 2019, according self-reported data mortgage lenders are required to file publicly under the Home Mortgage Disclosure Act