The Best Mortgage Loans for First-Time Homebuyers

Dated: May 6 2022

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Buying your first home can be exciting and overwhelming at the same time. You’re fulfilling the American dream but at the same time, taking on the largest debt of your lifetime. 

Fortunately, there are many great mortgage loans for first-time homebuyers. Here are our top choices.

FHA Loans

FHA loans used to be known as a ‘first-time homebuyer’s loan.’ While today anyone can use the program, it is a great program for anyone that hasn’t owned a home before because of its flexible guidelines and low down payment requirements.

FHA loans require mortgage insurance for the life of the loan at a rate of 0.85% of the loan amount. Your insurance payment decreases each year as you pay your balance down, but you pay it for the life of the loan.

How to Qualify

Minimum 580 credit score

Maximum 43% - 50% debt-to-income ratio

At least 3.5% of the purchase price as a down payment

Stable income and employment for the last 2 years

No recent bankruptcies

Proof you’ll occupy the property as your primary residence

Conventional Loans

Conventional loans are reserved for borrowers with good credit, but it doesn’t have to be perfect. We’ve seen borrowers get approved with a credit score of 660 which isn’t in the ‘good credit’ range.

Conventional loans are different from FHA loans because you can cancel your Private Mortgage Insurance once you owe less than 80% of the home’s value. This means your mortgage payment will decrease once you eliminate PMI.

How to Qualify

Minimum 660 credit score

Maximum 36% - 43% debt-to-income ratio

At least 3% down payment (5% if you owned a home before)

Stable income and employment for the last 2 years

No recent bankruptcies

VA Loans

VA loans are for veterans that served or are serving our country. This flexible mortgage program doesn’t require a down payment and has the most flexible guidelines for veterans.

The program is only for owner-occupied properties and is a great option for veterans right out of the military looking to buy their first house.

How to Qualify

Minimum 620 credit score (this varies by lender since the VA doesn’t have a minimum credit score requirement)

Maximum 43% - 50% debt-to-income ratio

No down payment required

Adequate disposable income according to your location and family size according to VA guidelines

Stable income and employment or proof of future employment if you just got out of the military

Proof you’ll occupy the property as your primary residence

Certificate of Eligibility to prove you are eligible for a VA loan

Final Thoughts

If you’re a first-time homebuyer, you have many mortgage options available to you. Compare your options and get quotes from at least 3 lenders. Each lender has different requirements and charges different rates and fees.

I’m happy to help you figure out which loan is right for you as well as help you find the house that’s perfect for your needs. Together we’ll make your dream of homeownership come true. 


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