Mortgage Loan Options for the First Time Home Buyer

Despite what your brother's buddy told you, there is no "easy button" for buying your first home. In fact, the notion of mortgage loan options specifically for the first time home buyer is a bit misleading. Yes, the government once offered tax incentives for first time buyers, but the old tax credits are gone. Most programs and easy money that once helped those buyers have also dried up. Instead of an easy button, buying a house really comes down to patience and perseverance.

While there isn't a magic button, first time buyers do have some great mortgage loan options available. Yes, they're available to any home buyer, but some of them especially help first time buyers. Some of these loan programs have low down payment requirements. Many first time home buyers have very little money to put down on their home. Other options help buyers pay for remodeling right off the bat, rolling the cost into the mortgage itself. This is great for fixer-upper homes for those of us who aren't handy with a hammer.

So while these loan options for a mortgage may not be written specifically for buying your first house, they are certainly a good option for that first purchase. Let's take a look at some of the mortgage loan options available for today's home buyer.

Low Down Payment Mortgage Loan Options

Whether you have no money for a down payment or very little, hope is not lost. FHA loans require the borrower to have 3.5% of the purchase price as a down payment. So if you're looking at a $100,000 home you'll need $3,500 for the down payment. While that may seem like a lot to come up with at the closing table, it's better than a 10% down payment some conventional mortgages require. Plus, FHA allows gifts for down payments. Family is the most common source of a down payment gift, but it could even come in the form of a bridal registry for the down payment.

Another low down payment option is HomePath® Mortgage. This loan option lets you buy a Fannie Mae-owned home typically priced lower than the market value of nearby homes. The down payment requirement is 3% so it's a bit less than FHA loans. Plus the homes are usually cheaper since they're Fannie Mae-owned. The mortgage investor is looking to unload these homes - they're not interested in owning vacant houses. Other benefits to HomePath include no appraisal and no mortgage insurance (ask us for cost details on loans without mortgage insurance).

Finally, there's a mortgage loan option that finances 100% of the home price - USDA Rural Development (RD). While you'll still need money for closing costs, there is no down payment requirement for RD. you'll need to find a house in an approved geographical area, but this option is great for first time home buyers because it will save you money on that down payment.

Fixer Upper Mortgage Loan Options

Many first time home buyers want to buy a fixer upper for their first home and turn it into their dream home. Sweat equity - putting the work into the home yourself to build equity - is great if you can swing the hammer. But if you're DIY-challenged, this might seem a bit daunting. Instead, you can use a home improvement loan like the FHA 203k to buy the house and finance remodeling done by a professional. Because it's an FHA loan you'll need 3.5% down, but rolling the cost of repairs and upgrades into the one mortgage means you'll save on the monthly cost. 

Imagine financing the cost of a $15,000 kitchen remodel and a $2,000 repainting and flooring project. If you do this with a short-term loan you'll be paying a high monthly payment to get it paid off quickly. Instead, rolling that $17,000 into you FHA 203k will add about $100 a month to your mortgage payment because the cost is amortized over the life of the loan. For every $1,000 in remodeling you finance with the FHA 203k, you'll add about $6 to your monthly house payment.

One final mortgage loan option for fixer-uppers is the HomePath Renovation Mortgage. This is part of HomePath that we discussed earlier, tailored for those Fannie Mae-owned homes that need repairs and upgrades. It's like the 203k in some aspects, but specifically for houses for sale through Fannie Mae's HomePath program.

Learn more about the mortgage options and more. Download "The Only Mortgage Loan Options Guide You Need" at the button below. In this free guide we cover more options for buyers, whether it's your first home or your fifth. Download your free copy below.

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