Mortgages for First Time Homeowners



Buying your first home is as exciting as it is complicated, and the list of things to know for new homeowners is about as long as a CVS receipt. One of the most important and confusing items on this list is the mortgage.

In one of our previous articles on first-time homeownership, we scratched the surface of what a mortgage is but with this article, we’ll dive deeper into what to expect and some expert tips to help you navigate the process.

What criteria do I need to meet for a first-time mortgage?

Homeowners applying for a mortgage will need to meet several requirements to be approved for a loan. According to Investopedia, certain lenders offer special loans and benefits for first-time homebuyers.

One thing that surprises many people is that there is a general definition of what a first-time homebuyer is, and to be approved for loans meant for a first-time homebuyer, you must also meet the terms of this definition, which is often broader than many realize. The criteria set by the U.S. Department of Housing and Urban Development (HUD) include:

  • who has not owned a principal residence for three years
  • an individual who has only owned a residence not permanently affixed to a foundation
  • a single person who has only owned with a spouse
  • an individual who has only owned a property that was not in compliance with building codes

If you find yourself under any of these categories, then there are a number of loan programs available to assist you in your home purchase.

Other requirements to be approved for a mortgage

Apart from the above criteria, some general requirements that you’ll also need to meet include proof of income (at a minimum of two years sufficient to pay the mortgage), a down payment of at least 3.5%, and a credit score of 620. With this in mind, there are also plenty of programs out there that allow first-time buyers to purchase without meeting these requirements.

What mortgage options are out there?

There are tons of mortgage options available, with the most common type of home loan being a 30-year fixed mortgage which is a traditional private loan from a bank. However, there are plenty of other loans available. Look through the most popular types below to see which one may be best for your situation.

1) Federal Housing Administration (FHA) loans: Insured mortgages that require only 3.5% down. FHA loans typically have competitive interest rates, smaller down payments, and lower closing costs than conventional loans.

2) U.S. Department of Agriculture (USDA) loans: This homebuyer assistance program is focused on homes in certain rural areas and has fixed payments.

3) U.S. Department of Veterans Affairs (VA) loans: These are no-down-payment loans for those with military connections, such as active-duty military members, veterans, and surviving spouses.

4) State first-time homebuyer programs: Outside of the national lenders, many states have local lender options that are better suited for the location of the borrower. NerdWallet has a great guide on first-time buyer programs by state.

5) Home renovation loan: For borrowers looking to buy and remodel – this gives homeowners credit for a home’s future value.

6) Fannie Mae and Freddie Mac loans: Created by Congress, Fannie Mae and Freddie Mac loans fuel the nation’s housing finance system. They back conventional loans with just 3% down.

Find the right property for you!

As you can see, there are tons of options when it comes to mortgages for first-time buyers. Taking some time to do your research and reflect on what your specific needs are can ensure that you match the best mortgage option for you. Take a look through Land Hub’s current listings to see what properties are out there!

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