Our experts answer readers' home-buying questions and write unbiased product reviews (here's how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.
If you're a first-time homebuyer who's struggling with the credit and down payment requirements that traditionally come with getting a mortgage, these home loans for first-time buyers can help you overcome those hurdles and finally get the keys to your very own home.
Compare the Best First-Time Homebuyer Loans
The mortgages listed here all have features that make them affordable for first-time homebuyers and other cash-strapped buyers. All allow low or no down payments, and many don't require private mortgage insurance (PMI).
PMI is typically required on mortgages with less than 20% down. PMI is a cost added to your monthly mortgage payment to help compensate for the risk the lender takes in allowing a low down payment.
Many of these mortgages also have flexible credit requirements, such as allowing borrowers to use non-traditional credit to qualify. Keep in mind that some lenders will only let you do this if you don't have a traditional credit score. If you have a low score, you may still need to work on improving it before you'll be able to qualify for a mortgage.
| Lender | Mortgage program | Down payment | PMI? | Flexible credit? |
| Bank of America | Community Affordable Loan Solution | 0% | No | Yes |
| U.S. Bank | American Dream Loan | 3% | No | Yes |
| PNC Bank | PNC Community Mortgage | 3% | No | Yes |
| Navy Federal Credit Union | Homebuyers Choice Loan | 0% | No | Yes |
| Wells Fargo | Dream. Plan. Home. Mortgage | 3% | Yes | Yes |
| Northpointe Bank | Northpointe 100% | 0% | Yes | No |
| Citibank | HomeRun Mortgage | 3% | No | Yes |
| Truist | Community Homeownership Incentive Program | 0% or 3% | No | Yes |
| Alliant Credit Union | Alliant Advantage Mortgage | 0% | No | No |
| Chase | DreaMaker Mortgage | 3% | Yes, reduced | Yes |
| Rocket Mortgage | ONE+ Mortgage | 1% | No | No |
| United Wholesale Mortgage | Conventional 1% Down | 1% | Yes | No |
| KeyBank | Key Community Mortgage | 0% | No | Yes |
Best First-Time Homebuyer Loans Frequently Asked Questions
What loan options are best for first-time buyers?
First-time homebuyers often gravitate toward government-backed mortgages like FHA loans thanks to their less stringent credit requirements and low down payment amounts. First-time buyers may also like conventional mortgages, since they allow down payments as low as 3%.
How do I find down payment assistance?
Your state or local housing authority may offer some form of down payment assistance, and many non-profits have programs to help buyers put money down. You can search online or reach out to your state's housing authority to see what's available in your area.
How do I buy a house for the first time?
Apply for preapproval with three or four lenders to get an idea of the loan amounts, terms, and rates that are available to you. Once you're preapproved, reach out to a real estate agent to start looking for houses. You may also decide to reach out to an agent first and get recommendations from them for good lenders in your area. The professionals you work with will help guide you through the process.
How much do you need to put down on a house?
The old fashioned answer is 20%, but many people don't put down this much. Conventional mortgages allow down payments as low as 3%, while FHA borrowers will need at least 3.5%. If you qualify for a USDA or VA mortgage, you won't need to make a down payment.
What credit score is needed for first-time buyers?
First-time homebuyers won't be subject to different credit score guidelines just because they're a first-timer, but certain programs geared specifically to these borrowers may come with different requirements. A score of at least 620 is generally needed if you're trying to get a mortgage, though you may qualify down to 580 or even 500.
First-Time Homebuyer Loan Reviews
Bank of America: Community Affordable Loan Solution
Bank of America's Community Affordable Loan Solution mortgage is an extremely affordable option for borrowers who qualify, since you won't need to bring any cash to closing.
Minimum down payment: 0% (plus no closing costs)
Requires PMI? No
Flexible credit requirements: No minimum credit score; uses rent, utility, phone, or auto insurance payments to establish a history of on-time payments.
What to look out for: This mortgage is available only in "designated markets," according to the bank's press release, including some historically Black and Hispanic neighborhoods in Charlotte, Dallas, Detroit, Los Angeles, and Miami. To qualify, you'll need to meet income limits and complete a homebuyer certification course.
U.S. Bank: American Dream Loan
U.S. Bank's American Dream Loan requires a down payment of at least 3% and comes with a generous amount of down payment assistance.
If your student loans have prevented you from qualifying in the past, you may have some luck with this loan program; U.S. Bank says it will work with borrowers who are on an income-driven repayment plan.
This loan comes with up to $10,000 in assistance that can be used toward your down payment, closing costs, or other expenses related to your home purchase.
Minimum down payment: 3%
Requires PMI? No
Flexible credit requirements: Accepts non-traditional credit if you have no score. If you have a credit score, it needs to be at least 640 to qualify. Requires a debt-to-income ratio below 43%.
What to look out for: This mortgage is available in 25 states. You'll need to contribute at least $1,000 of your own funds at closing. Income limits apply.
PNC Bank: PNC Community Mortgage
PNC Bank's PNC Community Mortgage is another of our favorite options for borrowers who can afford to make a small down payment.
In addition to a low down, no-PMI mortgage, PNC Bank offers a $5,000 closing cost grant to borrowers who meet income limits or live in a low- to moderate-income area.
Minimum down payment: 3%
Requires PMI? No
Flexible credit requirements: PNC Bank says this loan has "relaxed" requirements and that many borrowers have an easier time qualifying for a PNC Community Mortgage compared to a traditional one.
What to look out for: You'll need to meet income limits to qualify.
Navy Federal Credit Union: Homebuyers Choice Loan
Navy Federal Credit Union's Homebuyers Choice Loan is a good option for Navy Federal members who don't qualify for a mortgage backed by the US Department of Veterans Affairs, since this loan works similarly to a VA loan, with no down payment and no PMI.
Minimum down payment: 0%
Requires PMI? No
Flexible credit requirements: Specific credit requirements for this loan aren't listed, but Navy Federal has noted online that it considers both your credit score and your banking history with this credit union.
What to look out for: You'll need to be a Navy Federal Credit Union member to get a mortgage with this lender. Membership is only available to veterans, those affiliated with the armed forces, Department of Defense, or National Guard, or those who have an immediate family member with a membership.
Wells Fargo: Dream. Plan. Home. Mortgage
Wells Fargo's Dream. Plan. Home. Mortgage is one of the more expensive mortgages on our list, thanks to its 3% down payment and PMI requirement. But it's still an overall affordable option for borrowers who want to put some money down, and its $5,000 closing cost credit is a worthwhile benefit.
This mortgage can be combined with Wells Fargo's Dream. Plan. Home. Closing Cost Credit. With this credit, borrowers can get up to $5,000 to use toward closing costs. The credit is only available in certain areas.
Minimum down payment: 3%
Requires PMI? Yes
Flexible credit requirements: Accepts borrowers with limited credit histories and low scores.
What to look out for: Unlike most of the mortgages on this list, this mortgage does require PMI, potentially making it a little pricier than some of your other first-time homebuyer loan options. Income limits apply.
Northpointe Bank: Northpointe 100%
Northpointe Bank's Northpointe 100% mortgage is a decent option for borrowers with a good credit score, but isn't as flexible as many of the other mortgages on this list.
Northpointe has one other specialty 0% down product, called the EquityBuilder. With this loan, you use the money you have saved for a down payment and instead put it toward a lower rate or shorter loan term.
Minimum down payment: 0%
Requires PMI? Yes
Flexible credit requirements: Requires a minimum credit score of 680.
What to look out for: This mortgage is available in 23 states. There are no income restrictions to qualify.
Citibank: HomeRun Mortgage
Citibank's HomeRun Mortgage is a good option for borrowers who need to apply using non-traditional credit, but the higher down payment requirement that comes with that might not be worth it. Citibank's closing cost assistance is on the high end compared to many of the other lenders listed here; borrowers may qualify for lender paid closing cost assistance up to $7,500.
Minimum down payment: 3%
Requires PMI? No
Flexible credit requirements: Accepts non-traditional credit, but you'll need a 5% down payment if you go this route.
What to look out for: This mortgage is only available in areas where Citibank has branch locations and accepts deposits, and in majority Black or Hispanic neighborhoods in Atlanta, Austin, Cambridge, Dallas, Denver, Houston, and Philadelphia. Income limits apply.
Truist: Community Homeownership Incentive Program
Truist's Community Homeownership Incentive Program mortgage is affordable thanks to its low down payment requirement with no PMI, but it doesn't have as many attractive additional features as some of the other loans on this list.
Minimum down payment: 0% in certain areas, 3% everywhere else
Requires PMI? No
Flexible credit requirements: Specific credit requirements for this loan aren't listed, but Truist does accept non-traditional credit in some circumstances from borrowers who don't have a credit score.
What to look out for: To qualify for a Community Homeownership Incentive Program mortgage, you'll need to contribute at least $500 of your own funds at closing. The remainder of your down payment can come from other acceptable sources, such as a gift from a family member. Income limits may apply.
Alliant Credit Union: Alliant Advantage Mortgage
Alliant Credit Union's Alliant Advantage Mortgage is a strong choice for those looking to completely avoid a down payment, but you'll likely need a good score to qualify. Non-first-time homebuyers may also qualify for this loan, but they'll need to put 5% down.
Minimum down payment: 0%
Requires PMI? No
Flexible credit requirements: Specific credit requirements for this loan aren't listed. To get a conventional loan with this lender, you'll need a score of at least 640.
What to look out for: This mortgage from Alliant Credit Union comes in the form of an adjustable-rate mortgage, meaning your rate will change after a certain number of years.
Chase: DreaMaker Mortgage
Chase's DreaMaker mortgage does require PMI, but at a reduced cost, making it more affordable than a regular, low down payment conventional loan. Borrowers who are eligible can combine this mortgage with Chase's Homebuyer Grant to get up to $2,500 or $5,000 in down payment or closing cost assistance. Plus, you can earn an additional $500 if you complete a homebuyer education course.
Minimum down payment: 3%
Requires PMI? Yes, reduced cost
Flexible credit requirements: Has less stringent credit requirements than its conventional mortgages.
What to look out for: Income limits may apply. To get the $5,000 Homebuyer Grant, you'll need to be buying a home in certain majority-Black, Hispanic, or Latino neighborhoods. Chase recently expanded this grant, making it available in more communities throughout the country.
Rocket Mortgage: ONE+ Mortgage
Rocket Mortgage's ONE+ Mortgage only requires that borrowers bring 1% of the purchase price to the table, rather than the typical 3%. Rocket will provide the other 2% in the form of a grant. This means that not only do you get to make a low down payment, but you'll also get additional equity from the lender's grant.
This isn't the only affordable program from this lender. Rocket recently introduced a few different programs to make homeownership more affordable to lower-income individuals. With its Purchase Plus program, you can get a credit of up to $7,500 to offset your down payment and closing costs.
It also offers Freddie Mac's BorrowSmart Access program, which provides a $3,000 down payment credit.
Minimum down payment: 1%
Requires PMI? No
Flexible credit requirements: This mortgage requires a credit score of at least 620.
What to look out for: You'll need to earn 80% or less of the area median income to qualify. Rocket's Purchase Plus program is only available in specific census tracts in Atlanta, Baltimore, Chicago, Detroit, Memphis, and Philadelphia. BorrowSmart is available in certain counties within the following metro areas: Atlanta; Chicago; Detroit; Memphis; Miami; Philadelphia; St. Louis; El Paso, Houston, and McAllen, Texas.
United Wholesale Mortgage: Conventional 1% Down
Wholesale lender United Wholesale Mortgage also has a product that allows 1% down payments, called Conventional 1% Down. It includes a grant of up to $4,000 to help borrowers reach a total down payment of 3%.
Minimum down payment: 1%
Requires PMI? Yes
Flexible credit requirements: UWM requires a credit score of at least 620 on its conventional mortgages.
What to look out for: UWM is a wholesale lender, which means you'll need to work with a mortgage broker to get a loan from this lender. You'll need to earn 80% or less of the area median income to qualify for this program.
KeyBank: Key Community Mortgage
KeyBank's Key Community Mortgage is an incredibly affordable option for low-to-moderate income borrowers or those in eligible areas. The bank also offers also offers a $5,000 closing credit to those who qualify.
Minimum down payment: 0%
Requires PMI? No
Flexible credit requirements: Accepts non-traditional credit.
What to look out for: Property must be located within a KeyBank Assessment Area, which generally refers to the geographical areas that the bank's physical branches serve. You'll need to live in a low-to-moderate income Census tract or earn less than 80% of the Federal Financial Institutions Examination Council Estimated MSA/MD Median Family Income to qualify. To qualify for the closing cost credit, you must live in an eligible Census tract within Arizona, California, Colorado, Connecticut, New Jersey, New York, Pennsylvania, Utah, or Washington.
How to Choose a First-Time Homebuyer Loan
If you're looking for a specialty loan product geared toward first-time homebuyers, remember that you aren't just picking a mortgage; you're picking a lender, too.
Look at online customer reviews to get an idea whether previous borrowers have had a good experience with the lenders you're considering. And be sure to get preapproved with at least two or three different lenders so you can compare rates and ensure you're getting the best deal.
Other Affordable Mortgage Options
If you aren't eligible for any of the mortgages listed here, you may still be able to find an affordable mortgage to fit your needs. Some of the loans that can help first-time buyers include:
- Low down payment conventional loans: Borrowers may qualify for a conventional loan with as little as 3% down. You'll need at least a 620 credit score and you'll be required to pay PMI until you reach 20% equity.
- FHA loans: Mortgages backed by the Federal Housing Administration are typically easier to qualify for, with a minimum credit score of 580 and a down payment of at least 3.5%. With a 10% down payment, you could potentially get a mortgage with a score as low as 500.
- VA loans: These mortgages allow 0% down, and are only available to service members and veterans who meet minimum service requirements. Minimum credit score varies by lender.
- USDA loans: These mortgages are backed by the US Department of Agriculture and are only available to low- to moderate-income borrowers in certain rural or suburban areas. They allow 0% down payments. Minimum score varies by lender.
- State government or housing finance agency mortgages: Your state's housing authority or housing finance agency may offer mortgages to low-income borrowers. These loans are often combined with down payment and closing cost assistance to keep out-of-pocket costs down.
Why You Should Trust Us: How Did We Choose the Best First-Time Homebuyer Loans?
We looked at the top mortgage lenders in the US that offer affordable mortgage programs to find the ones that stand out. We then evaluated them based on the following criteria:
- Affordability: To gauge how affordable each mortgage is, the main factors we considered were minimum down payment and whether the mortgage has flexible credit requirements that could make it easier for borrowers to qualify. Flexible credit requirements could include allowing borrowers to use non-traditional credit, such as rent payment history, to qualify or considering a borrower's entire financial picture even if they have a low score. We also looked at whether these mortgages require PMI or if they come with additional affordable features like closing cost assistance.
- Customer satisfaction. We looked at online customer reviews to gauge how satisfied customers are with each lender. Many of these lenders also ranked high in J.D. Power's 2022 Mortgage Origination Satisfaction Study.
- Trustworthiness. Almost all of our top picks earned an A- or better rating from the BBB, with the exception of Navy Federal Credit Union, Bank of America, and Citibank. We also considered any recent public scandals from the last three years.
See our full ratings methodology for mortgage lenders »
from All Content from Business Insider https://www.businessinsider.com/personal-finance/best-first-time-homebuyer-loans
via gqrds
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.