Skip to content
Home Blog Traditional Loans

4 Popular Mortgage Programs for First-Time Home Buyers

Joshua Bucio
2 min read
4 Popular Mortgage Programs for First-Time Home Buyers

First-time home buyers have a few really good programs to choose from. These mortgage programs only require little money down, and some allow a lower credit score. It’s common to see first-time home buyers have little money for a down payment or a lower credit score that prevent them from buying a home. These shouldn’t stop first-time buyers from looking into what programs are available to them.

FHA Loan Program

The FHA Loan program (Federal Housing Administration) is one of the most popular programs among first time home buyers.  Here are some of the best things about this program:

  • The minimum down payment is 3.5% of the purchase price.
  • The down payment can be gifted from an approved source. It doesn’t have to be your own funds.
  • The minimum credit score, with most lenders, is 580.
  • Interest rates are lower than conventional mortgage loans in some situations.

Most first-time buyers take advantage of FHA loans vs Conventional loans as the FHA program has a smaller down payment required, and lower credit scores allowed.

self-employ-mortgage

VA Loan Program

The VA Loan program is specifically for military veterans and people currently active in the military. I thinks it’s the best mortgage program available, as it should be for those who choose to serve our country.

Related: 5 Harsh Realities About Real Estate Investing Every Newbie Should Know

Here are some of the best things about this program:

  • There is no down payment required for this program. Yes, 100% financing is allowed!
  • Both veterans and people active in the military qualify.
  • You can use your VA certificate of eligibility more than once.
  • The interest rates are lower than conventional mortgage loans in some situations.
  • There is no minimum credit score requirement; instead, VA requires a lender to review the entire loan.
  • No PMI (private mortgage insurance) payment is required by the lender.

Anyone that has served in the military should seriously look into the VA mortgage program.  It allows no down payment and no PMI payment, which is the only mortgage program that allows both.

The USDA Rural Development Loan

The Rural Housing program is for home buyers looking in a rural area. This is one of the most popular first-time home buyer programs for anyone looking outside of a city area.

Here are some of the best things about this program:

  • There is no down payment required for this program. Besides the VA program, it’s the only other no down payment program.
  • The minimum credit score, with most lenders, is 640.
  • The interest rates are similar to the FHA and VA programs — lower than conventional mortgage loans in some situations.
  • This program doesn’t have a PMI payment, but they have there own monthly fee. It’s much less than the traditional PMI payment.

If you are looking in a rural area to buy a home, it’s best to look into this program. Since it’s one of the only two no down payment programs, it’s become very popular with first-time home buyers.

security-deposits

Related: An FHA-Financed Duplex is an Ideal First Investment Property: Here’s Why

Conventional 97

The Conventional 97 program is another low down payment program that many first-time buyers use.

Here are some of the best things about this program:

  • The minimum down payment is only 3% of the purchase price.
  • It’s a conventional program, so the interest rates are going to be favorable like other conventional mortgages.
  • The minimum credit score, with most lenders, is 620.
  • It’s a Fannie Mae product, so it can be used with any Fannie Mae wholesale lender.

If you are looking for a good interest rate and a very low down payment program, this Fannie Mae program is going to be a good option.

Which of these loans do you prefer and why?

Let me know your question and comments below!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.