As you shop for your first home, you will discover there are multiple types of mortgage products you might qualify for. To help you understand these different types of loan products, here is what you should know about them as a first time homebuyer.
- FHA. When people think about mortgages for first time homebuyers, many immediately picture FHA loans. These are mortgages backed by the Federal Housing Administration. First time and repeat homebuyers are allowed to apply for them. Many first time homebuyers struggle to make a large down payment, and benefit from FHA loans allowing down payments as low as 3.5%, depending on borrower qualifications. They also have flexible requirements and competitive interest rates. One drawback, however, is that there is an upfront mortgage insurance premium (MIP) required for any FHA loan, no matter how large the down payment is. There is also monthly MIP for those who put down under 20%.
- Conventional. Conventional mortgages are not backed by government agencies. When people talk about them, they are using thinking of “conforming” conventional loans. Those are loans that fit within the Fannie Mae and Freddie Mac conforming loan limits. Down payments of around 20% are typical, but sometimes you might qualify for a lower down payment if your borrower profile is competitive and the lender allows it. Just be aware that if you put down under 20%, you will have to pay for private mortgage insurance (PMI).
- Jumbo. It is possible to borrow beyond the Fannie Mae and Freddie Mac conforming loan limits with a non-conforming “jumbo” loan. First time homebuyers often assume they cannot qualify for a jumbo mortgage. But if your profile is strong enough, you might be able to take out this type of loan. You will need to be prepared to make a larger down payment in most cases.
- VA. Some homebuyers may be able to purchase their first home using a VA mortgage. This type of loan is backed by the Department of Veterans Affairs. You may be eligible if you are a veteran, active-duty service member, or surviving spouse. If you served or are serving, there are specific service records requirements you have to meet. We can look up whether you meet these requirements, and request your Certificate of Eligibility (COE) for you. A VA mortgage is one of the top choices for first time homebuyers who qualify, because you can move into a home with zero down payment. The credit qualifications are flexible, and the interest rates are competitive even without a perfect score.
- USDA. You can buy your first home in a rural area with a USDA mortgage, which is a type of home loan backed by the US Department of Agriculture. USDA mortgages feature flexible credit qualification, and no down payment. Interest rates are fixed and affordable. There is a mortgage insurance requirement, but it is more cost-effective than the requirement for other types of loans. Like VA loans, USDA loans are a wonderful opportunity, making it easier for qualifying homebuyers to move into their first home. Not sure if the area you are shopping for a home in qualifies as rural? You might be surprised. We can help you find out.
What About Foreign Nationals?
What type of loan you need as a foreign national depends on your status. But if you have a green card, you should be able to purchase your first home in the US with a conventional or FHA loan.
Buy a Home in Florida
PLC is based in Cooper City, and can help you buy your first home anywhere in Florida. To get started, please give us a call at (540) 838-5868 to schedule your consultation. We can answer your questions about these types of mortgages, and help you figure out which type of loan will suit your needs.
