The Best Mortgage Loans for First Time Homebuyers

The Best Mortgage Loans for First Time Homebuyers


Buying your first home can be exciting and overwhelming at the same time. You’re fulfilling the American dream but at the same time, taking on the largest debt of your lifetime. 

Fortunately, there are many great mortgage loans for first time homebuyers. Here are our top choices.

FHA Loans

FHA loans used to be known as a ‘first time homebuyer’s loan.’ While today anyone can use the program, it is a great program for anyone that hasn’t owned a home before because of its flexible guidelines and low down payment requirements.

FHA loans require mortgage insurance for the life of the loan at a rate of 0.85% of the loan amount. Your insurance payment decreases each year as you pay your balance down, but you pay it for the life of the loan.

How to Qualify

  • Minimum 580 credit score
  • Maximum 43% – 50% debt-to-income ratio
  • At least 3.5% of the purchase price as a down payment
  • Stable income and employment for the last 2 years
  • No recent bankruptcies
  • Proof you’ll occupy the property as your primary residence

Conventional Loans

Conventional loans are reserved for borrowers with good credit, but it doesn’t have to be perfect. We’ve seen borrowers get approved with a credit score of 660 which isn’t in the ‘good credit’ range.

Conventional loans are different from FHA loans because you can cancel your Private Mortgage Insurance once you owe less than 80% of the home’s value. This means your mortgage payment will decrease once you eliminate PMI.

How to Qualify

  • Minimum 660 credit score
  • Maximum 36% – 43% debt-to-income ratio
  • At least 3% down payment (5% if you owned a home before)
  • Stable income and employment for the last 2 years
  • No recent bankruptcies

VA Loans

VA loans are for veterans that served or are serving our country. This flexible mortgage program doesn’t require a down payment and has the most flexible guidelines for veterans.

The program is only for owner-occupied properties and is a great option for veterans right out of the military looking to buy their first house.

How to Qualify

  • Minimum 620 credit score (this varies by lender since the VA doesn’t have a minimum credit score requirement)
  • Maximum 43% – 50% debt-to-income ratio
  • No down payment required
  • Adequate disposable income according to your location and family size according to VA guidelines
  • Stable income and employment or proof of future employment if you just got out of the military
  • Proof you’ll occupy the property as your primary residence
  • Certificate of Eligibility to prove you are eligible for a VA loan

Final Thoughts

If you’re a first time homebuyer, you have many mortgage options available to you. Compare your options and get quotes from at least 3 lenders. Each lender has different requirements and charges different rates and fees.

I’m happy to help you figure out which loan is right for you as well as help you find the house that’s perfect for your needs. Together we’ll make your dream of homeownership come true.

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