The first home you buy is often overwhelming and understanding all your options can sometimes be tough. The financing is one of the hardest things to deal with, but if you take the time to look at all your financing options, you might be surprised how many different ways you can go.
First-time Buyer Loans
If this is your first home, you might be surprised how many finance companies will offer you loans with low down payments and low interest rates. They want to get your business, and when you are buying your first home, they will provide you with incentives to get you to use their company for the loan. The interest rates are often very good and the down payment low, so taking advantage of a loan like this to get started is a good option. Remember, if you need to, you can refinance with another company later if you choose to.
VA loans are a great option if you are a veteran. They have low interest rates and offer no money down financing. If you apply for a VA loan, you will need a credit score of around 620 to qualify, but some smaller finance companies will offer loans to vets with slightly lower scores. VA loans do not require mortgage insurance, so you save a substantial amount of money over the course of the year, but most companies do require a funding fee for VA loans that are typically 2.15% of the loan. You can roll the funding fee into the loan so if the seller pays the closing costs; you could buy a home with no cash outlay if you qualify.
The Federal Housing Administration loans are some of the easiest loans to qualify for, and the options with the loan are good. For buyers with credit scores as low as 500, the FHA will work with you. The FHA offers down payment of 10% for lower credit scores and allows you to use 100% gift funds for the down payment.
Often the term is very flexible, but keep in mind that the mortgage insurance is expensive on FHA loans so keeping the loan term short can save you a lot of money over the life of the loan. While not right for everyone, FHA loans are backed by the government and offer first-time buyers an opportunity to buy a home and build their credit and some equity in their first home.
For more information on home loan purchases, contact your local home loan office today.