According to the guidelines set out by Federal Housing Administration, first-time home buyer is a person who’s taking loan to buy a house for the first time, or someone that has not held ownership in a home over the past three years. A first-time home purchase can be daunting, but there are some ways to ease the tension and make financially smart decisions when buying your first home.

Understand What Home Ownership Means

First-time buyers have several options available, and should take the time to learn about them. It is important for buyers to have a solid understanding of what options are available to their specific needs. Planning resources are available from financial planners and real estate specialists, and your bank’s loan officer can help determine your current situation.

Most importantly, individuals need to determine if they qualify to borrow money to buy a home. With enough savings and a steady income, there should be several realistic loan options that will work for a first time buyer.

What Kind of Loan Can I Afford?

The key to making a smart financial decision on a first time home loan is not overreaching. That is, it is important to determine how large a loan and monthly payment the individual can afford comfortably each month. Many new buyers without experience in purchasing property think they can make larger monthly payments than might be feasible. That’s why a realistic plan is necessary. To determine this plan, buyers should consider all costs related to homeownership as well as their income before obtaining a first home mortgage. Here are common costs to keep in mind:

  • Most loans, including a first time home buyer loan, will require a debt to income ratio under 50 percent. That means the amount of debt the borrower has each month should not be more than half of their income.
  • Every mortgage borrower must get home insurance by law.
  • Don’t forget to include real estate taxes.
  • Calculate the cost for utilities by talking with the neighbors and your real estate agent.

Don’t forget to include your non-home related expenses as well.  Car payments, groceries, credit cards, everyday living expenses – each counts against your debt and income, so plan accordingly.

Lenders Have Qualifications You’ll Have to Meet, Too

When obtaining a first time home buyer loan, individuals will need to discuss their needs and their qualifications for borrowing with the loan officer – it’s usually an at-length process! The goal here is to understand what the first time home buyer qualifications are for that particular loan. Using governmental guidelines, lenders will decide the type and size of the loan to be made, and then offer the buyer several potential options (assuming the buyer meets the base qualifications). Borrowers need to be able to choose the loan that fits their needs.

These base requirements for first-time buyers normally include:

  • Good-to-great credit history, usually with more than one credit account
  • Credit scores are often at 580 or higher for low-risk loans such as FHA loans
  • A job, trust, or other steady income is almost always required
  • No legal judgments or foreclosures

Again, it is critical to understand that every situation is different. Each lender will have slightly different requirements for loans, so be prepared for slight changes if you’re shopping different lenders.

Buying Your First Home

If there’s anything to be taken from this blog, it’ to consider your first-time loan very carefully. First time home buyer incentives, discount loan offers, and easier qualification options are all often available to first time buyers and can help make taking a loan and paying it off easier. Let’s take a look at some programs that might lighten the loan for first-time buyers.

What Kind of Incentives Are Available for First-Time Buyers?

When obtaining a first time home buyer loan, you should explore all the possible incentives lenders might offer. These are generally discounts available to reduce the overall cost, which make them a no-brainer for buying your first home.

For a first time home buyer mortgage, consumers should turn to the federal government’s numerous options. These are discounted programs available because the federal government provides the lender with an insurance, or guarantee for the program.

FHA and VA Loans

FHA (Federal Housing Administration) and VA (US Department of Veteran’s Affairs) loans are the most common mortgage choices for first-time buyers.

  • FHA loans allow first time home buyers to obtain a loan with lower down payment requirements, lower credit scores, and more flexibility in other qualifications. It’s a great way to get started on property ownership.
  • VA loans are reserved for people who have military service, active or retired. As part of the incentives to join the military and serve, these loans do not require a down payment, have lower interest rates, and require less overall qualifications.

First Time Home Buyers Program

First time buyers program options are available from most lenders. After all, the lenders want to make loans and do business. While the specifics of first time buyers programs may change from state to state and lender to lender, most first time home buyers programs provide individuals with less stringent lending requirements and more affordable rates. Certain discount programs and first time buyer’s incentives can include:

  • Next Home Programs, which are easier-to-qualify for loans for those who already have purchased previously (applicable for “first time buyers” who have not owned property for 3 years or more)
  • Down payment assistance programs
  • Many loans are available for first responders like police, firefighters, and EMTs
  • There are grant programs available for college graduates and those with master’s degrees and PhDs
  • Mortgage tax credit programs which can help to reduce costs through state incentives..

Other First Home Mortgage Options

First time home buyer mortgage options extend beyond these two options. Additionally these programs (and others) can be available:

  • Seniors over the age of 52 may qualify for other loans as well as an FHA reverse mortgage.
  • Mobile homes or modular homes may quality for lower rates and loam terms.
  • Choose an FHA Energy-Efficient Mortgage for those making energy-efficient improvements.
  • People with confirmed tribal associations may qualify for Native American Direct Loans.
  • Loans exist for those purchasing in rural areas and farmland.
  • There are available loans for remodeling and renovations as well.

For those buying your first home, it pays to look into all loan options available and to compare them carefully. First-time home buyer options range widely to meet the needs of most consumers.

Mike Timoschuk

Mike is an established expert in mortgage loan origination and refinances in California and nationally, with over 15 years of hands-on experience. He’s been helping consumers and businesses get the best deals on mortgage loans for his entire career, with a personalized touch and professional presence since beginning his career. In his (limited) spare time, Mike is devoted to his family, his Southern California locale, and outdoor activities like Iron Man competitions.