Top 5 Mortgage Financing Options to Owning a Home for First Home Buyers

Getting a mortgage is the first step towards owning a home. It can be daunting but with the right guidance, the process becomes so easy and fulfilling in the end. There are so many benefits of owning a home but the reality, however, is that with the myriad of financing options available to first-time homebuyers, they often will feel overwhelmed especially comparing owning a home vs. renting. To make it easy for you to understand, you will need to understand the different financing options available to you. Taking your time to research each of these options will be fundamental to this process. 

To date, there are many governments and private programs that make the realities of owning a home a possibility. Unlike in the past where you had to struggle just finding the right lender who was willing to be flexible, today, you will find that it is possible owning a home with no money down. In this blog, we have rounded up some of the best financing options nationally- programs and loans for the first-time homebuyers that will help you get into your first home, even with no money down so that you can begin enjoying the benefits of owning a home sooner. 

FHA Loans

FHA loans are usually the best go-to program for many middle to low-income Americans with a limited capacity. They are insured by the Federal Housing Administration and typically require you to have a smaller down payment and a lower credit score than most conventional loans. Owning a home through FHA financing is easy as a person can qualify with a minimum credit score of 580 and as little as 3.5 percent in down payment alternatively, a credit score of between 500 to 579 with at least 10 percent in down payment. 

The downside of the FHA Loans is that you will need to pay mortgage insurance if you do not have enough money to cover the required 20 percent down. This means that overall, the borrowing cost for the loan can be higher as you will be subjected to an upfront premium and annual premiums. Unfortunately, the insurance is not meant to protect you as a homeowner; rather, it is used to protect the lender in case you default on your loan. 

Learn more about the top 10 things you should know about FHA loans

VA Loans

The U.S. Department of Veterans Affairs makes the realities of owning a home more conceivable through the VA loans program. What you need to understand about the Department of Veterans Affairs, however, is that it does not make any loans itself, but guarantees mortgages that are made and processed by qualified lenders. Such guarantees make it possible the dream of owning a home for the veterans who are able to obtain mortgages with favorable terms. 

Of importance to note about the VA loans is that they come with a lower interest rate compared to other types of loans and perhaps a major perk to these loans is that it is possible owning a home with no money down. A downside however is that borrowers will need a funding fee, but if you find a flexible lender, that fee could be rolled into your monthly loan repayments. In some instances, some service members may be exempt from paying the fee. 

Some other perks of the VA loan include the fact that you are not required to have a minimum credit score or even mortgage insurance as in the case with the FHA Loans. Additionally, you can negotiate with your lender if you find that you are struggling to pay your monthly loan repayment while still enjoying the full benefits of owning a home.

Good Neighbor Next Door

The Good Neighbor Next Door program was an initiative dubbed the Teacher Next Door Program but later was expanded to cover law enforcement, firefighters, and emergency medical technicians, hence the name, Good Neighbor. Basically, this is a HUD-sponsored program that makes it possible owning a home for these groups of people. The program allows a 50% discount on the list price of the homes located in revitalization areas. 

The Good Neighbor Next Door program makes the realities of owning a home more valid and all you have to do is commit yourself to live in the property for at least 36 months. To search for the properties available in your state, check out this website

The HomePath Ready Buyer Program

The HomePath Buyer Program enables buyers to buy a Fannie Mae-owned home with just a low down payment. A qualified buyer is guaranteed a 3 percent in closing costs assistance and must be first-time homebuyers. A condition is attached, in that, a buyer must complete an educational class and buy a foreclosed Fannie Mae property. 

This program is more for first-time homebuyers who have a desire to owning a home but need help in raising the closing costs. The trick with this program is finding a HomePath property in your market as most foreclosed properties do not make it to the listing sites. 

USDA Loans

These are loans backed up by the U.S. Department of Agriculture and guarantees loans for some rural homes. Basically, the realities of owning a home through these loans have never been more real as these loans provide 100 percent financing. To be eligible doesn’t mean you have to be a farmer, but you have to buy a home in a USDA-eligible area. 

A perk to this type of financing is that you can begin your journey to owning a home with no money down. However, it has its limitations in that there are income limits based on where you live and the loan is more for the people who earn low to moderate incomes. In addition, you need to have a credit score of 640 or higher to qualify. 

Bottom Line

Given the many benefits of owning a home, you want to get into your first home sooner than later. If you are looking for a mortgage to finance your first home, chances are, you will get overwhelmed and it may be difficult to sort through all the financing options. It is good that you sit down, understand your financial position, this will help you figure out whether you need additional assistance apart from the mortgage. Some loans require a down payment while in others you can begin the journey of owning a home with no money down. Some will require you to have closing costs and some will note. As such, it important to first do your homework and really figure out what you need right off the bat.