5 Loans and programs for first-time homebuyers

Buying your first house is exciting, but as real estate market is tough, it can also be overwhelming and stressful. However, there are a lot of programs for first-timers that might help you.

If you want to become a homeowner, there are many programs, loans and grants that will help first-time buyers achieve their goal. Here are 5 options for you to consider:

1-    FHA Loan

This loan is ideal for those with low credit or smaller down payments. Insured by the Federal Housing Administration, these loans have a lower credit score requirement than other loans. The minimum requirements are a credit score of at least 580 and a 3.5% down payment or a credit score of 500 to 579 and a 10% down payment.

However, for this loan, you need to pay private mortgage insurance, so borrowing costs can be a little bit higher. It’s worth mentioning that this insurance does not cover you, it covers the lender in case you default the loan.

2-    USDA Loan

This loan is ideal for borrowers with lower or moderate-income purchasing a home in a USDA-eligible area.
The U.S. Department of Agriculture (USDA) guarantees loans for certain rural homes. This does not mean that you need to buy a farm, but the property has to be located in a USDA-eligible rural area.

To apply for this loan, you need to have a minimum credit score of 640. Otherwise, you need to provide further documentation on your payment history in order to get approval.

3-    Fannie Mae or Freddie Mac

Best for borrowers with strong credit but minimal down payments, these government-sponsored enterprises set guidelines for loans they’re willing to buy from conventional lenders.
Both programs require a down payment of at least 3% and a minimum credit score of 620 and a relatively clean financial history.

4-    Energy-efficient mortgage (EEM)

This loan is ideal for homebuyers that want to make their home more energy-efficient but don’t have the cash for these upgrades. These loans are insured through the FHA or VA programs and they do not require a large down payment.

5-    FHA Section 203(k)

This loan is ideal for homebuyers who want to buy a property that needs to be fixed, but don’t have the money to make all the major improvements.
Insured by the FHA, the loan will calculate the home value after improvements and you can borrow the amount needed for your project. Improvements must cost more than $5,000 and you need to make a minimum of 3.5% down payment.

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