A First-Time Homebuyer is someone who has not owned the primary residence they live in for three years.
Whether you have never purchased a home or you have not owned a home in the last three years, you are considered a First-Time Homebuyer. Understanding your options as to what loan programs and what the mortgage process is about can be a challenge. In fact, that’s why our CEO, Scott Gordon offers a video on the Simplification of the Mortgage Process:
As a First-Time Homebuyer, it is important to have a discussion with your Open Mortgage Loan Originator to gain perspective on what types of loans may be suitable for you and your family. You may also wish also to discuss tax advantages that may be available to you through a tax advisor.
Our Loan Originators will discuss the best loan programs available to you and will give you a full disclosure of all of the applicable costs and interest rates when you apply for your loan.
Mortgage Programs that maybe available to you are:
The FHA Loan Program
The Federal Housing Administration, generally known as “FHA”, provides mortgage insurance on loans made by FHA approved lenders throughout the USA.
FHA insures mortgages on single-family and multi-family homes. FHA is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934. These loans must meet certain requirements established by FHA to qualify for insurance.
Unlike conventional loans that adhere to strict underwriting guidelines, FHA insured loans may require lower cash investment. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment.
In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property – whichever is longer.
More than half of the First-Time Homebuyers in the USA use FHA insured loans. The minimum down payment is 3.5%.
The VA Loan Program
VA loans for Veterans maybe the best and least expensive loans available, but there are military service requirements for eligibility.
You must have at least 90 days on active duty and been discharged under other than dishonorable conditions. If you served less than 90 days, you may be eligible if discharged for a service-connected disability.
Surviving spouses of a serviceperson may also be eligible for these military benefits.
The USDA Loan Program
USDA loan is also a very good program available to everyone, and may include no money down. In order to be eligible for USDA loans, household income must meet certain guidelines.
Also, the home to be purchased must be located in an eligible rural area as defined by USDA.
The Conventional Loan Program
Conventional loans are also worth consideration. Some require as little as 5% down. Our experienced Loan Originators will offer clear comparisons, making the decision easy.
Summary for First-Time Homebuyers
The Mortgage Programs that may be available to First-Time Homebuyers are:
- FHA – minimum of 3.5% down
- VA – for veterans and military, may be zero
- USDA – rural areas, maybe zero down
- Conventional – may be as little as 5% down
Sellers can, and in some cases will, pay the First-Time Homebuyer’s closing costs. In this scenario, total costs could be the down payment, inspection fee of approximately $400 (varies state-to-state) and appraisal of approximately $500 (varies state-to-state). Your Loan Originator will disclose these fees and options to you in the application process.