Top 4 Mortgage Loan Programs for New Home Buyers in the US

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Most Americans want to buy a home for the first time at some point in their lives and there are many attractive mortgage loan programs worth considering. It is no secret that money and finance issues often interfere with the ability to buy that first house. According to a recent survey by Apartment List, a rental service, 80% of millennial renters want to buy their first home but cannot afford it.

Many do not realize however that there are a multitude of first-time home loan programs that can help the person without a lot of cash or credit to buy their first house. You may be eligible to buy a home and not realize it.

home loan programs

Many Top Banks and Mortgage Lenders have announced aggressive mortgage loan programs for new house buyers in all 50 states.

Here are five of the best new home buyer loan programs that can help you get into your first home and stop paying rent.

Fannie Mae HomePath Loans

A first-time homebuyer who thinks they cannot buy a home because of credit or income problems may want to consider this new Fannie Mae program. The HomePath program allows you to put down as little as 3% on a home and to qualify for credit with a FICO score as low as 620. Also, would be buyers may qualify for up to 3% in closing cost assistance to buy a HomePath property. Most of the properties that you can buy with this program are foreclosures that are owned by Fannie Mae. You can get a really good deal with these homes if you find one that interests you.

FHA-Loan Programs

The most popular and attractive home loan program for a prospective buyer without a lot of money or credit is the FHA program backed by the Federal Housing Administration. This program is designed for people with a decent job and income but a low-down payment and average to poor credit.

The FHA-insured loan is backed by the US government, and the lender can then afford to take the risk of giving a loan to a person with a lower credit score, more debt and low down payment. If you have at least a 580-credit score, you may be able to get an FHA loan with a 3.5% down payment. If you have a credit score under 580, you may still qualify for FHA financing  but you will need to have a down payment of 10%.

FHA-mortgage loans have very competitive interest rates and may even be lower than what you can get with a conventional loan. This is quite a nice deal for a buyer with a low credit score and down payment. The major downside of the FHA program is higher than average mortgage insurance costs. But, when you consider that the loan can have an interest rate in the 4.5% range as of August 2018 and you no longer pay rent, getting an FHA mortgage can still be a good deal.

USDA Loan Programs

The USDA home loan program is backed by the Department of Agriculture. It also is intended for home buyers with a lower income, credit score and down payment. The home loan is guaranteed by USDA, and you might get a loan with no down payment required. This is one of the last home loan programs in the US that has no down payment required.

The big thing to know about USDA mortgages is that you need to be buying a home in an area that USDA says is ‘rural.’ This does not necessarily mean you must buy in the sticks, but the home will definitely need to be outside major urban and suburban centers.

Buyers who have at least a 640-credit score will have the quickest approval times for their loan. You can still qualify with under a 640-credit score, but the lender will want to see more documentation about your finances.

The USDA program has income limitations; you cannot earn more than 115% of the median income for the area in which you are buying.

Home buyers who want to live in a more rural area and have lower income and credit scores really should consider the USDA program, given that it is easy to qualify for, and has a 100% financing option.

VA Loan Programs

If you are a US military veteran or active military, you should know about the VA program backed by the US Department of Veterans Affairs. The VA guarantees most of the mortgage terms, so lenders can offer you a very low interest rate, 100% financing and no mortgage insurance payment. That means that qualified VA borrowers have access to zero-down mortgage loans.

The VA program also does not have a minimum credit score requirement. Buyers need to show they have the income to afford the mortgage and their other debt obligations, but it is possible to get into a home backed by the VA with low income and credit scores. This should be the first home loan program you consider if you are US military or a veteran. Check today’s VA mortgage requirements.

Once again, this is a great year for first time home financing. With the economy roaring and the housing industry soaring across the country many banks, credit unions and mortgage lenders have extended new first-time mortgage programs with competitive terms and rates.

About Bryan Dornan

Bryan Dornan is Chief Editor of RefiGuide.org. Bryan has worked in the mortgage industry for over 20 years and has a wealth of experience in providing mortgage clients with the highest level of service in the industry. Bryan's continual focus is to promote affordable home-ownership to consumers like you across the United States. Should you have any questions about articles like this, let him know.