In the US, first-time home-buyer loan programs are created to help eligible people in realizing the dream of owning a home in an affordable area. Some programs even extend to those who owned property in the past but haven’t done so within the last three years.
These loan programs and initiatives, provided by mortgage lenders, local governments, and community organizations, come with benefits such as economical loans, tax incentives, aid with closing costs, and support for down payments.
Who is eligible for loan programs for first time buyers? Only people who meet the mortgage loan requirements for down payments, credit score, debt-to-income payment and income.
Below is a compilation of 12 noteworthy first-time homebuyer programs:
- Fannie Mae HomeReady
- Fannie Mae Standard 97% Loan-to-Value (LTV)
- Freddie Mac Home Possible
- Freddie Mac HomeOne
- FHA loans
- FHA 203(k) loans
- VA loans
- USDA loans
- Good Neighbor Next Door
- HUD Homes
- HomePath Ready Buyer Program
- Native American Direct Loan
We will explain in details for better understanding and guide to choose the program that best suites your pocket.
1. Fannie Mae HomeReady®
The HomeReady loan program is a type of regular or conventional mortgage, not backed by the government, but guaranteed by Fannie Mae. It’s provided by some lenders and it is for people with lower to moderate incomes. HomeReady loans have lower down payment requirements, allow various income sources, and come with lower private mortgage insurance (PMI) costs.
Requirements to Qualify for Fannie Mae HomeReady loan
Who is eligible for a Fannie Mae HomeReady loan? Only people who meet basic criteria for down payments, credit score, debt to income payment and income.
- Minimum Down Payment: You can start with as little as 3% of the home’s price (but you’ll need mortgage insurance until you owe 80% or less of the home’s value).
- Minimum Credit Score: A score of at least 620 is needed.
- Maximum Debt-to-Income Ratio: Your monthly debts should be no more than 36% of your income (with some exceptions up to 45% or 50% in certain cases).
- Income Limits: Your income must be within 80% of the median income in your area.
Is it right to get a Fannie Mae HomeReady loan?
The HomeReady loan program is a great option for people with moderate incomes and lower credit scores of 620 or higher.
Fannie Mae Standard 97% Loan-to-Value (LTV)
Fannie Mae offers another low-down-payment loan option through participating lenders called the Fannie Mae Standard 97% loan. This program allows first-time buyers to put down a minimum of 3% without any income restrictions. While borrowers will need to complete a homebuyer education course and pay standard mortgage insurance premiums, they won’t be limited by income requirements. This provides more flexibility for those who want to purchase a home with a lower down payment.
Requirements to Qualify for Fannie Mae Standard 97% loan
Who is eligible for a Fannie Mae Standard 97% loan? Anyone who can meet the requirements for the loan. The Fannie Mae Standard 97% loan features are:
- Down payment minimum: 3% (private mortgage insurance required until loan balance reaches 80% of home value)
- Credit score minimum: 620 credit score is required to qualify
- DTI maximum: 36% (exceptions made up to 45% or 50% in some circumstances)
- No income limit: Allows borrowers with various income levels to qualify.
Is it right to get a Is it right to get a Fannie Mae HomeReady loan?
Should I get a Fannie Mae Standard 97% loan?
Fannie Mae’s Standard 97% loan option is well-suited for borrowers with Good credit, High incomes and Limited savings for a substantial down payment.
Freddie Mac Home Possible®
The Home Possible program is another conventional loan option intended for low- and moderate-income borrowers. It features a low down payment requirement, discounted mortgage insurance, and flexible income guidelines, making it a suitable choice for those seeking affordable homeownership.
Requirements to Qualify for Freddie Mac Home Possible loan programs
Who is eligible for a Freddie Mac Home Possible loan?
- Down payment minimum: 3% (private mortgage insurance required until loan balance reaches 80% of home value)
- Credit score minimum: 660 (Borrowers with no credit scores may qualify with a 5% down payment)
- DTI maximum: 45%
- Income limit: Limited to 80% of the area median income (AMI)
Is it right to get a Is it right to get a Freddie Mac Home Possible loan?
The Home Possible loan is a great option for borrowers who want a low-down-payment loan and have a credit score of at least 660. It’s also suitable for those without a credit score who can make a down payment of at least 5%.
Freddie Mac HomeOne®
HomeOne, offered by Freddie Mac, is a conventional loan tailored for first-time homebuyers, featuring a low down payment requirement and adaptable income criteria. To qualify, borrowers must complete a homebuyer education course. While standard mortgage insurance premiums apply, there are no income restrictions.
Requirements to Qualify for Freddie Mac HomeOne loan Programs
Who is eligible for a Freddie Mac HomeOne loan?
- Down payment minimum: 3% (private mortgage insurance required until loan balance reaches 80% of home value)
- Credit score minimum: 660
- DTI maximum: 45%
- Income Limit: No income limits
Is it right to get a Is it right to get a Freddie Mac HomeOne?
The HomeOne loan is a great choice for borrowers with good credit scores and higher incomes who want to buy a home with a minimal down payment.
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FHA loans – Federal Housing Administration
The FHA loans are supported by the Federal Housing Administration (FHA) and adhere to mortgage rules established by the U.S. Department of Housing and Urban Development (HUD). These loans are popular among first-time homebuyers due to their low down payment requirements and flexible qualification criteria.
While income limits do not apply to FHA mortgages, there are maximum loan limits based on the borrower’s county and property type. FHA borrowers are required to pay both an initial and an annual mortgage insurance premium. Recent changes in 2023 have led to a reduction in the annual mortgage insurance premium for most new buyers, dropping from 0.85% of the loan amount to 0.55%.
Requirements to Qualify for FHA loan programs
Below are the key details to be eligible for an FHA loans:
- Down payment minimum: 3.5% with a credit score of 580 or higher; 10% with a credit score between 500 and 579.
- Credit score minimum: 580 with a down payment of 3.5%; 500 with a down payment of 10%.
- Maximum Debt-to-Income (DTI) ratio: 43%, with some exceptions up to 50% in certain situations.
- Loan limits: Determined by FHA mortgage limits based on the county and type of property.
Is it right to get a Is it right to get an FHA loan?
People who don’t have much money saved for a down payment or have some issues in their credit history might find it easier to get approved for an FHA loan compared to other types of loans.
FHA 203(k) loans
Homebuyers who are interested in purchasing a fixer-upper property have the option to use an FHA 203(k) mortgage, which allows them to combine the expenses of buying the home and making renovations into a single loan. These loans are backed by the Federal Housing Administration (FHA) and adhere to the standard FHA loan criteria.
There are two variations of FHA 203(k) loans: limited, intended for smaller repair costs under $35,000, and standard, designed for more extensive renovation projects. Normally, to ensure the completion of repairs, borrowers might need to allocate contingency reserves.
Requirements to Qualify for FHA 203(k) loans
Who is eligible for an FHA 203(k) loan? Here are the key details for FHA loans:
- Down payment minimum: You can put down 3.5% with a credit score of 580 or higher, or 10% if your credit score is between 500 and 579.
- Credit score minimum: A credit score of 580 is required for a 3.5% down payment, while a score of 500 is sufficient if you’re putting down 10%.
- Maximum debt-to-income ratio (DTI): The highest DTI allowed is 43%, although exceptions can be made up to 50% in certain cases.
- Loan limits: The total property value is subject to FHA mortgage limits based on the county and property type.
Is it right to get a Is it right to get an FHA 203(k) loan?
FHA 203(k) loans are an excellent choice for individuals looking to buy a home that needs renovation work, especially if they have a modest down payment or credit scores that may not be very high.
VA loans – Veteran Affairs
The U.S. Department of Veterans Affairs (VA) provides a loan program for active-duty service members, veterans, and eligible surviving spouses. The VA loans are unique in that they don’t require a down payment, have no income restrictions, and offer flexible credit guidelines. While borrowers don’t have to pay ongoing mortgage insurance, there is an upfront funding fee associated with these loans.
Requirements to Qualify for VA loan programs
Who is eligible for a VA loan? Only people who has the following;
- Down payment minimum: No down payment required
- Credit score minimum: No specific minimum score (though many participating lenders require a 620 credit score)
- debt-to-income ratio (DTI) maximum: 41% (exceptions made in certain situations)
- Borrower requirement: You have to meet VA’s minimum service requirement
Is it right to get a Is it right to get a VA loans?
VA loans are particularly beneficial for qualifying military borrowers, especially those in search of a loan option that doesn’t require a down payment.
USDA loans – U.S. Department of Agriculture
The U.S. Department of Agriculture (USDA) provides two types of mortgage programs: the Single Family Housing Guaranteed Loan Program and the Single Family Housing Direct Home Loans. Both of these USDA loan options are designed for borrowers purchasing homes in rural areas and offer the advantage of no-down-payment loans.
The Guaranteed program, which is administered through approved lenders, is tailored for individuals with low to moderate incomes. Borrowers in this program are required to pay both an upfront and an annual guarantee fee.
On the other hand, the Direct program involves the USDA directly financing the mortgages. This option is intended for very low- and low-income borrowers and does not come with a guarantee fee.
Requirements to Qualify for USDA loan programs
The USDA offers two mortgage programs: the Single Family Housing Guaranteed Loan Program and the Single Family Housing Direct Home Loans. These options are designed for homebuyers in rural areas and provide no-down-payment loans.
These are the key rquirements for the USDA loan programs:
- Down payment: No minimum down payment required
- Credit score minimum: No specific program minimum, though some lenders may require a minimum credit score of 640
- Maximum Debt-to-Income (DTI) ratio: 41%, with exceptions possible up to 44%
- Income limits: Eligibility is based on income, with the maximum being up to 115% of the median household income
- Location requirements: The property must be situated in a designated rural area.
Is it right to get a Is it right to get a USDA loans?
USDA loans are well-suited for homebuyers with very low, low, and moderate incomes who are looking to purchase homes in designated rural areas.
Good Neighbor Next Door loan Programs
The Good Neighbor Next Door program, provided by the U.S. Department of Housing and Urban Development (HUD), offers a unique mortgage opportunity for public service professionals. Qualified individuals can purchase HUD properties in designated revitalization areas at a 50% discount from the purchase price.
If they choose to finance the home with an FHA loan, they only need a minimum down payment of $100. To avail of the purchase price discount, borrowers agree to a silent second mortgage, which means they won’t make payments or pay interest as long as they reside in the home for three years.
Requirements to Qualify for Good Neighbor Next Door loan programs
The Good Neighbor Next Door program has specific eligibility criteria:
- Borrower requirement: The borrower must be a full-time law enforcement officer, pre-K through 12th grade teacher, firefighter, or emergency medical technician.
- Property requirement: The property purchased must be a HUD home.
- Residency requirements Residency requirement mandates living in the home for a minimum of three years.
- Down payment minimum: Down payment must meet the conditions of the chosen loan program.
- Credit score minimum: Credit score must meet the prerequisites of the selected loan program.
Is it right to get a Is it right to get a Good Neighbor Next Door loan?
The Good Neighbor Next Door program is particularly well-suited for people working in public service professions who are interested in buying a home within a revitalized community and are committed to residing in the property for a minimum of three years.
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HUD Homes loan – Housing and Urban Development
The U.S. Department of Housing and Urban Development (HUD) gives buyers the chance to purchase HUD-owned (foreclosed homes) at prices below the market value. Although this isn’t a loan initiative, potential buyers have the option to utilize different types of loans to purchase a HUD home, contingent on the property’s condition. To place bids on these properties, individuals will need to collaborate with a real estate broker who is registered with HUD, even though they can browse listings within their states.
Requirements to Qualify for HUD Homes loan programs
Who is eligible for a HUD Home?
- Down payment: You must fulfill the down payment and
- Credit score: This criteria set by the selected loan program.
Is it right to get a Is it right to get a HUD Homes loan?
Buying a HUD home is a good choice for buyers seeking significant discounts on a property and are capable of handling the expenses and tasks associated with home repairs.
HomePath Ready Buyer™ Loan Programs
The HomePath program by Fannie Mae isn’t a loan itself, but it aims to make buying a home easier and more affordable. It offers education for homebuyers and early access to Fannie Mae-owned properties that are in foreclosure, before investors get a chance.
Normally, if first-time homebuyers complete Fannie Mae’s HomeView education course, they may receive up to 3% assistance for closing costs when purchasing a HomePath property. The HomePath Ready Buyer Program can also be combined with a HomeReady Mortgage.
Requirements to Qualify for HomePath Ready Buyer loans
Who is eligible for the HomePath Ready Buyer Program?
- Property requirement: Purchase a HomePath property
- Borrower requirement: Complete the Fannie Mae HomeView course for potential 3% closing cost assistance
- Down payment minimum: Follow the criteria of the chosen loan program
- Credit score minimum: Meet the specified credit score requirement of the selected loan program
Is it right to get a Is it right to get a HomePath Ready Buyer loan?
Homebuyers considering a HomeReady Mortgage may discover value in HomePath properties, which often come with significant discounts.
NADL loans Programs – Native American Direct Loan
The Native American Direct Loan (NADL) is a specialized VA loan designed for Native American veterans or veterans married to Native American spouses. Similar to standard VA mortgages, the NADL program offers benefits such as no down payment requirement, lower interest rates, and reduced closing costs. However, what sets it apart is that buyers receive direct financing from the VA itself, distinguishing it from other VA loan options.
Requirements to Qualify for Native American Direct Loan Programs
To be eligible for the Native American Direct Loan (NADL) program:
- Borrower requirement: You must be a Native American veteran or a veteran with a Native American spouse.
- Down payment: No down payment is required.
- Credit score: While there’s no specific minimum credit score set by the program, many lenders may require a credit score of at least 620.
- DTI maximum: Your debt-to-income ratio (DTI) must typically not exceed 41%, although exceptions may be made in certain situations.
Is it right to get a Is it right to get a Native American Direct loan?
The Native American Direct Loan (NADL) program is a great option for veterans who qualify and are looking for a low-cost, no-down-payment loan.
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First-time homebuyer loan programs by state in USA
Apart from national first-time homebuyer programs, numerous state housing financing agencies, local governments, and community organizations provide their own first-time homebuyer loans and various initiatives to assist homebuyers.
Mortgage Rate Trends for Loan Programs
| Loan Type | Avg APR | 3 Month Diff |
|---|---|---|
| 30 Yr Fixed | 7.540% | 0.45% |
| 15 Yr Fixed | 6.990% | 0.52% |
| 5/1 ARM | 7.800% | 0.31% |
Mortgage interest rates are currently lower than the peak levels seen in the fall of 2022 when they reached a high of 7.08% for a 30-year fixed rate. However, there has been some minor fluctuation in rates recently, ranging from 6.00% to 6.75%.
Economists are forecasting a potential decrease in mortgage rates by the end of the year. This could lead to increased purchasing power for buyers and the potential for reduced monthly mortgage payments, which is positive news for those seeking to buy a home.
Frequently asked questions for Loan Programs
Who qualifies as a first time home buyer home programs in the US?
A lot of first-time homebuyer programs are available to individuals who haven’t owned a property within the last three years. This eligibility criterion extends to individuals who were previously joint property owners with an ex-spouse due to divorce.
Does my state have first time home buyer loan programs?
Apart from the national first-time homebuyer loans, various state and local governments, along with community organizations, provide diverse first-time homebuyer programs, such as down payment assistance initiatives and other supportive measures. To discover these programs in your region, you can explore the state listings provided by HUD at https://www.hud.gov/buying/localbuying.
How to choose the best mortgage Borrower?
Truely, eelecting the right mortgage lender will hinge on the specific type of loan you’re seeking, the amount you wish to borrow, and various other considerations. For comprehensive information, you can refer to our guides on the best mortgage lenders, top FHA lenders, and top VA lenders in United States.
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