There are a variety of mortgage options geared towards the first-time home buyer, as well as many different ways to obtain a home loan. Conducting Internet searches can help first-time home buyers find traditional lending institutions, national and local banks, government-approved lenders, and mortgage brokers who specialize in doing the legwork to find the most appropriate mortgage loan provider for you.
Before you even consider buying a house, you need to know in advance what size mortgage you can afford. As a first-time home buyer, it’s easy to get carried away with the excitement of house hunting and homeownership ― but doing the proper research and paying attention to details will help you avoid problems further down the road.
At mortgage application, first-time home buyers must show proof of their current financial obligations, credit history, and employment status. Your projected mortgage payments will be compared to your current income/debt to determine the impact of your housing expenses (which include principal, interest, mortgage insurance, homeowners insurance, and property taxes).
It’s important that you don’t spend all your money on buying a house. Having extra funds set aside for emergencies will provide a cushion in case you lose your job or become ill. Additionally, first-time home buyers who can afford a 20% down payment (of the home’s purchase price) can avoid paying for Private Mortgage Insurance (PMI). Homebuyers who put less money down may be allowed to cancel their mortgage insurance once they’ve repaid 20% of their loan.
First-time home buyer loan programs are offered by a variety of mortgage lenders in many states, as well as several government agencies (including Fannie Mae, the Federal Housing Administration, and the Department of Veterans Affairs). Fannie Mae, for example, has incentive programs for first-time home buyers to purchase homes. Fannie Mae’s HomePath Mortgage Financing program offers fixed-rate, adjustable-rate, and interest-only mortgages for as little as 3% down with no appraisal fees, even if your credit score is not perfect. Fannie Mae also has a “Flex” program for first-time home buyers with good credit, which requires only 5% down and no mortgage insurance.
Furthermore, there are some special first-time home buyer programs for teachers, law enforcement personnel, firefighters, healthcare workers, active military personnel, and veterans. Because these individuals are considered valuable assets to their communities, many states offer loan programs with preferred financing, no- or low-down payment options, no mortgage insurance, and waived appraisal fees. In some cases, first-time home buyers may also receive tax credits for purchasing property in distressed areas.