4 Paths to a Competitive Mortgage Program for First Time Home Buyers

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Why don’t more people own their own home? For many, financial issues stand in the way. According to a recent survey of millennial renters, 80% want to buy a home but say they cannot afford to do so. But many of those renters may think they cannot qualify for first time home mortgage when they can!

There are several competitive mortgage programs out there that can help the first-time home buyer to live the American Dream.

Here are four of them:

#1 FHA Loan Programs

Most renters who think they cannot get a home loan or cannot afford it may not know how easy it is to get an FHA mortgage insured by the Federal Housing Administration. The FHA is an agency under the US Department of Housing and Urban Development.

FHA is critical in supporting home ownership for first time home buyers in America. It helps first timers and others with lower incomes and credit challenges by insuring the mortgage. This just means if you fail to pay, the FHA will pay back the lender. This is a critical point because once lenders know the US government will pay them back, they will extend credit to some borrowers they would not in normal circumstances.  FHA mortgages are great for the 1st-time home buyer because they only require a 3.5% down payment, 580+ credit score, and flexible income requirements. You will still need to prove with financial documentation that you can afford the loan, according to FHA guidelines. But most 1st-time mortgage applicants are surprised to learn how easy it is to be approved for an FHA loan. There are thousands of approved FHA finance companies in the US, so you should be able to find a lender in your area.

#2 USDA Loan Programs

The US Department of Agriculture or USDA has a great home buyer assistance program that works well for many lower income, first time borrowers. This program offers mortgages to people in lower income brackets who have average or poor credit.  However, this program is only for those who are buying a home in a designated rural area of the country. You will need to check the USDA website if the home you want to buy is in a ‘rural’ area. Some homes near major cities may qualify, so be sure to check their site. You also can talk to your lender or real estate agent to see if the home you want is eligible for a USDA loan.

As with an FHA option, the USDA guarantees your mortgage. Generally, this program is available with 100% financing. That means eligible borrowers can get a no money down mortgage at a competitive interest rate. Loan payments are fixed and have very low interest rates comparable to FHA.  You need a credit score in the 640 range to be eligible for many USDA approved lenders, but you may find a lender with more flexible criteria.

Generally, you cannot earn more than 115% of the median income for that part of the country but check with your lender to see if you can qualify for this loan.

#3 Fannie Mae Loan Program

Fannie Mae is a popular government backed finance program that also work with various lenders across the country to offer mortgages to first time buyers with income or credit problems.  With a lender that is backed by Fannie Mae or Freddie Mac, you may get a loan with a 3% down payment and low interest rate, as well as flexible qualification criteria. To qualify for this program, you may need to take a short home buyer education course through Fannie Mae or Freddie Mac.

#4 Local Grants and Down-Payment Assistance Programs

In addition to the above programs that are offered through the US government, you can find local mortgage programs for first time buyers in your state or county. Some of these programs will provide down payment help, low interest rates and other financial assistance to those who qualify in their community. For example, in Texas, you can get mortgage and down payment help through the Homes Sweet Texas Home Loan Program. This is a program that is designed for borrowers with lower income. Down payment assistance can be from 3% to 5%, and that does not need to be repaid. It is a 30-year, fixed rate program, and there are several programs available depending upon the area and lender.

While it is intended mostly for first time buyers, you can have bought a home before to qualify.  You also may be eligible for a mortgage credit certificate that saves you up to $2000 per year on the mortgage interest you pay. This can be deducted off your taxable income.  This program does not have a minimum credit score, but your income must fall within certain limits.


Millions of people delay applying for a mortgage because they think “I can’t get a home loan.” But the above programs help millions every year to become a home owner. Talk to your lender about these programs today.

References: http://www.tsahc.org/homebuyers-renters/loans-down-payment-assistance