How to Finance a First Home…and Ways to Save $$$
A home is the most expensive purchase you will make in your lifetime! As a first time home buyer, it is imperative to understand the mortgage process and how you can get the most bang for your buck. Below is an overview of options for first time home buyers, but you should consult with a realtor and a qualified lender for specifics.
One note, the term first time home buyer doesn’t just mean if you’re buying your first home. Many financing options consider someone a first time buyer if you haven’t owned a home in three years. Ask your lender!
Options for 1st Time Home Buyers:
FHA Loans: An FHA loan is the typical choice for most first-time buyers. FHA loans are a government-insured loan that allows a down payment as low as 3.5 percent. You’ll need a credit score of 500 and a history of making on-time payments on other loans. But condo purchases have some restrictions.
Home Possible mortgage: Issued through Freddie Mac, this loan allows a down payment of 3 percent to 5 percent. Requirements include that you use the home as your primary residence, and you cannot currently own or share ownership in another house. You’ll also be required to complete an online home ownership education program before you get approved.
HomeReady loan: A mortgage that is provided through Fannie Mae and is another option that requires as little as a 3 percent down payment. Its unique feature is that it allows nonoccupant borrowers to apply. So parents can apply for this mortgage for an adult child who might still be working on establishing or improving his credit.
In addition to assistance for first time home buyers via specialized mortgage options, the Virginia Housing Development Authority(VHDA) offers a down payment assistance grant for first time home buyers. VHDA is a public-private organization that receives no state taxpayer dollars. Through programs like the down payment assistance grant, VHDA has helped over 300,000 individuals and families secure housing.
VHDA offers a down payment assistance grant for first time buyers. The grant is a percentage of the purchase price that goes toward the buyers down payment. VHDA has requirements that buyers must meet, including a 620 credit score and a max of 45% debt to income ratio. These requirements change yearly, but a qualified lender can help you.
If you’re considering purchasing a home in the next 12 months, I recommend you talk with your realtor to find a qualified lender — then talk to that lender about your options. When you’re buying your new home, you want a strong team around you to get your dream home at a great price!