What are some popular loan options for first-time home buyers?
For first-time home buyers, there's more flexibility and when it comes to structuring your mortgage. Here are some of the more popular loans options.
1. FHA Loan – FHA loans are fixed-rate mortgages backed by the government and insured by the Federal Housing Administration. Generally speaking, FHA loans are the easiest type of loan to qualify. With FHA loans, you can purchase a home with 3.5% down payment and a credit score in the high 500's.
2. Fixed Rate Loans– Fixed rate mortgages are loans where the interest rate remains unchanging for the life of the loan. Fixed-rate loans represent approximately 75% of all home loans in the U.S. The 30-year fixed is the most popular loan in the U.S., although fixed-rate loans can come in terms of 10, 15, or 30 years. Conventional loans can require a PMI, or private mortgage insurance, on down payments less than 20%.
With a solid credit score, manageable level of debt, and a steady income, there's a good chance you will meet the minimum qualification requirements on a fixed-rate mortgage. Typically, credit scores of 600 or higher and debt-to-income ratios under 43% are accepted by lenders, although there is no industry standard.
3. VA Loan – VA, or Veterans Affair mortgages, are loans guaranteed by the United States Department of Veterans Affairs and eligible to Veterans who served time in active duty. The Department of Veterans Affairs loan program offers 100 percent financing, which means you don't need to pay a down payment or PMI. Coupled with a VA guarantee of 25 percent of a home's loan amount up to $113,275, the VA loan is a top choice for veterans and active military members.