Finance Options: What First-time Homebuyers Should Know
First-time homebuyers have a lot to think about, but probably the first thing is how they will afford a home. Fortunately, there are many programs designed to help first-time homebuyers make their dreams of owning a home come true. It all comes down to the amount of your down payment and your credit scores. Here are some of the options.
Low-cost Conventional Loans
Conventional loans are the more traditional loans, ones that are not affiliated with a government program but follow government regulated guidelines. If a homebuyer can qualify for a conventional loan, that’s great! Depending on the market rates, these loans can be some of the best around, especially now when rates are hovering below 4%!
With the relaxation of lending regulations over the past year, there are conventional loan programs available with as little as 3% down with no mortgage insurance premium! The applicant must meet the necessary guidelines, but this type of loan certainly is worth exploring.
Loans that are insured by the Federal Housing Administration are known as FHA loans. These are loans given through private lenders, which are regulated by the FHA. FHA loans permit down payments as low as 3.5%. The most attractive feature for an FHA loan applicant is that FHA will allow for lower credit scores than those allowed for conventional loans. If your credit score is not pristine, this may be the place to turn.
The United States Department of Agriculture (USDA) has a singly family guaranteed loan program. The loan program helps approved lenders offer low and moderate income households opportunity to buy a primary residence in an eligible rural area. The loans cover building, rehabilitating, improving or relocating the home.
While these loans can be extremely helpful to those who might not otherwise be able to afford a home, there are restrictions. However, if you meet the guidelines, USDA financing is a great program for many first-time homebuyers!
VHDA stands for Virginia Housing Development Authority. The VHDA is a non-profit organization, which was developed by the Commonwealth in 1972. The VHDA’s mission is to provide mortgages, specifically for first-time homebuyers and developers of affordable rental properties. The VHDA uses no state taxpayer dollars. Rather, the organization raises money in capital markets to fund loans.
VHDA offers a variety of loans with low down payments. Borrowers might even qualify for assistance with down payments and closing costs. Note, though, that the VHDA sets its own rules for income eligibility.
VA loans are granted through the Department of Veterans’ Affairs (VA). The program is open to eligible veterans, current service members and surviving spouses. VA loans are made by private lenders and guaranteed by the VA.
One positive of VA loans is that these loans offer low-cost refinance options. They also offer protection if the borrower has difficulty paying the loan. These loans do not require a monthly mortgage insurance payment; however they do require a fee to be paid at closing. VA loans come with low or no down payment and are attractive to many eligible service members and their families.
With all these options, first-time homebuyers have a good chance of finding a program that meets their needs. It’s important to compare and contrast the options, though, to find the best rates and programs. A good mortgage lender can help educate first-time homebuyers and lead them through the process. For more information on obtaining a lender or on buying a home, call Belinda Jacobson-Loehle at 703-338-9678 or email Belinda@JacobsonRealty1.com.
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