The BEST First Time Home Buyer Loans To BUY YOUR FIRST HOME!

if you're planning to buy your first home you may be overwhelmed with the amount of loan options available to you but don't worry I've done the research for you and have outlined the top loans that you need to consider as a first-time homebuyer so let's get started my first pick is the FHA loan this government-backed loan allows you to qualify for a mortgage at a lower credit score and with less money as a down payment this sounds like a win for most first-time homebuyers so some of the big Pros to using the FHA loan are that lower down payment with an FHA loan you would only need three and a half percent as a down payment to qualify for this home now keep in mind that doesn't include closing costs which could be another three to five percent of your purchase in addition to the lower down payment the FHA loan is also a lot easier to qualify for there are lower credit requirements when it comes to your credit score and they are more lenient when it comes to you your debt to income ratio and if you're like Nicole what are you talking about what's a debt to income ratio how do I calculate mine I will link my debt to income ratio video up here so that you can check it out with any loan type there's always going to be some cons as well because you are taking out a loan you're borrowing money it's not going to be free and it's just how it is so with the FHA loan some of the cons are mortgage insurance is going to be on that loan type for the life of the loan so what mortgage insurance is for some of you who may just be new to this process is it is an additional insurance that your lender would charge you monthly this is something that goes in it's combined with your monthly payment that you pay each month on your mortgage and mortgage insurance is paid for the lender it's protection for the lender so when you're getting an FHA loan and the lender is taking a little bit more risk because they're allowing you to only put three and a half percent down they require you to have this mortgage insurance and pay that in to them every single month this mortgage insurance doesn't protect you it protects the bank in the event that you were to default on the loan so with FHA Loans mortgage insurance just comes with it it's just a piece of the pie if you get an FHA loan you're going to have mortgage insurance this is a loan that I used for my first home purchase and I'm still paying mortgage insurance on that loan in addition to the mortgage insurance another potential con is that the FHA Loans do have lower borrowing limits than something like a conventional loan so you may not be able to get as high of a total loan amount if you are in a very expensive area with the FHA loan there are also very strict property requirements this comes into play when you get an appraisal the appraiser is going to go out for the bank and justify the value of the home with the FHA loan there are pretty strict requirements that the house must meet for example it has to be livable there has to be sheetrock on the walls the kitchen has to have certain appliances in it like a range there can't be paint chipping off the walls it can't be unfinished in any way it definitely has to be livable it has to have central heat and air for example so there are some additional requirements that the home would have to meet as long as you think that you could move in and it's pretty ready to go it will probably pass with an FHA my second recommendation is the USDA rule development loan you know I love this one the USDA loan is less known overall but can be a very very useful option for first-time home buyers it's available to borrowers in rural areas or certain areas outside of the city limits may also qualify as well and it offers 100 financing so what I like to say is the USDA loan if you are buying in a rural area and you're having a hard time coming up with your down payment and enough money to cover your closing costs your the USDA loan could be a great option for you because it's all almost like having down payment assistance built into your loan since they are 100 financing it for you now with this there are some pros of course no down payment so even if you do have money saved up then maybe since they are 100 financing you could use that money for something else maybe you want to repaint the house for example additionally with certain USDA loan programs you may be able to get a lower interest rate than you may experience with an FHA or a conventional loan the USDA loan also has a no mortgage insurance so that is a differentiator between it and FHA now there are no set credit score requirements when it comes to the USDA rule development loan however if you are going the guaranteed route and you are getting this USDA loan through a lender in your area they will give you set credit score requirements and that's because they are the ones who are allowing you to get the loan you're getting it through them it is guaranteed by USDA but it is coming to you through a different lender so they have the right to impose their own credit score requirements at that time now some of the cons are that the USDA loan does have very strict income limits a big differentiator between the USDA loan and the FHA and conventional loans is that USDA is going to use the entire income of the household for qualifying purposes so let's say that the maximum income for a household of four people is a hundred and three thousand dollars in the area that you were trying to buy they're going to use everyone who makes income in that household group it all together and they're going to say that it needs to be under whatever that threshold is in your area now this is different because usually on loans we would only see the income of the actual applicants considered but USDA doesn't care about whose name is actually on the application if they are going to be living in the house they will consider their income additionally with this loan type we talked about how it is for rural areas or areas outside of the city limits so there are location restrictions to where you can buy and use loan now there is another way to get this loan it's the direct way the direct way is through USDA directly and with going that route you may be able to get the lower interest rate it is for the very low income borrowers and depending on if you decide to go that route there could be some funding availability issues there could be a longer processing time as well so just kind of watch out for that and if you have questions specifically on USDA loan of course I made that comprehensive guide already I'll link it up here you can check it out the third best option that I think is out there when it comes to home loans for first-time homebuyers is a conventional loan of course one of the big Pros here is that there are higher loan limits you are not restricted to only buying at a certain threshold when you use the conventional loan another big perk here is that there is no mortgage insurance now this is only true if you come with at least a 20 down payment so if you're a first time home buyer but you you are very financially Savvy you're a good spender or maybe you have some money that you've invested in stocks or things like that that you could pull out for a down payment and you want to put down that 20 it definitely is financially advantageous to do so and go the conventional route because you will have a lower monthly payment because you do not have mortgage insurance with a conventional loan there are often flexible terms so you can go the fixed rate route where you have the same interest rate for 15 to 30 years and it's very easy to budget for or you can also get an adjustable rate mortgage of course there are different terms of duration when it comes to the conventional loan as well now there are some cons a conventional loan typically does require a higher down payment additionally there are going to be stricter credit and income requirements in order to qualify for the conventional loan you know who you are if you are a budget Savvy Money Saver you've got good to Great to excellent credit you are probably going to see the most advantages with a conventional loan because conventional loans will reward you for being very financially secure and financially Savvy now if you do decide to go the conventional loan route just know that there are options to put less than that 20 down in some cases you can put three percent down five percent down ten percent down but anytime you have a down payment less than that 20 percent you will have that PMI private mortgage insurance now the differentiator here is that even if you go the conventional route and you have mortgage insurance because you put 10 down let's say once you hit 20 in the home 20 Equity or 80 loan to value you can have that PMI drop off your loan and your monthly payment will come down so it's not on the loan for the entire life of the loan which differs from the FHA loan that was a lot of loans I said loan like four times in that sentence so with any of these loan options that I mentioned or really any loan out there the pros and cons differ depending on your situation and your financial goals because of this it is always always always a good idea to consult with a lender to determine what the best loan option is to suit your unique needs so if you're thinking to yourself and you're like Nicole I know this I've watched your videos and I'm ready to get started great in the description of this video you will see a link to schedule a free 30-minute pre-approval consultation call with my team of mortgage experts if you are ready to start the home buying process this is your first step so click that link and get it scheduled you've already done the heavy lifting and I can promise you no more than a solid 75 to 80 of first-time homebuyers just because you are out here watching videos educating yourself about the home buying process so round of applause to you if you have any additional questions about the best loans for buying a home let me know in the comments below you can also find my contact information in the description I'm Nicole nerk Arkansas real estate broker with videos to help you find your way home and I will see you in the next one oh good you're still there I wanted to go ahead and mention that kanji and I have launched kvn Brands which is a lighting and home fixture company available to you guys through Amazon as you can see right here I've got one of our awesome Cube lights behind me these are perfect for Accents in your new home so if you are looking for some lighting fixtures make sure to check it out

Channel: Nicole Nark

Views: 28,318

Keywords: first time home buyer loans, down payment assistance, first time home buyer, first time home buyer tips

Id: 1mhTzPzFhwY

Length: 10min 46sec (646 seconds)

Published: Thu Mar 23 2023