The best mortgage lenders for first-time homebuyers embrace FHA, VA and USDA loans, and have low minimum down payments. Here are tips to find the best lender.
When you’re a first-time homebuyer, shopping mortgage lenders may feel like a huge chore. But, like buying a car or choosing an insurance policy, taking time to compare your options can save you heartache as well as money.
How to look for a first-time home buyer mortgage lender
The best mortgage lenders for first-time homebuyers embrace government loans, offer low down payment options, charge reasonable fees, and help you find financial assistance programs. Here are five tips to help you choose a mortgage lender when buying your first home.
When you’re a first-time homebuyer, shopping mortgage lenders may feel like a huge chore. But, like buying a car or choosing an insurance policy, taking time to compare your options can save you heartache as well as money.
How to look for a first-time home buyer mortgage lender
The best mortgage lenders for first-time homebuyers embrace government loans, offer low down payment options, charge reasonable fees, and help you find financial assistance programs. Here are five tips to help you choose a mortgage lender when buying your first home.
1. Know your credit score and history.
Getting a first-time home buyer mortgage is like applying for college: Only those with the right combination of grades and experience are accepted. But instead of GPA and extracurricular activities, lenders look at your credit score and financial history, and both can affect your mortgage rate in a big way.
Review your credit score and report to learn more about the details lenders judge you on, like debt-to-income ratio, a big factor in deciding how much they’ll let you borrow. Keep in mind the amount you’re allowed to borrow may be different than what you can comfortably afford each month. Use NerdWallet’s home affordability calculator to zero in on a realistic number.
Don’t worry if aspects of your credit are less than stellar: With time and determination, credit problems are fixable. And healthy credit gives you more lenders and affordable loan options to choose from.
2. Ask about first-time homebuyer programs.
Some lenders partner with state agencies to offer rate discounts, down payment assistance or educational resources to help first-time homebuyers purchase a home. These programs include affordable loan and grant options for public servants, veterans or those with student loans, and benefits can often be combined to make buying your first home as affordable as possible.
Although state housing and finance agencies market these first-time homebuyer programs, the mortgages are handled by typical banks, credit unions, and non-bank lenders. Eligibility requirements vary by state, program, property location, and lender — and not all lenders participate, so be sure to ask.
3. Seek lenders who offer government-backed home loans.
State agencies aren’t the only places to find first-time homebuyer mortgages, of course. Loans offered by the U.S. Department of Agriculture, U.S. Department of Veterans Affairs and the Federal Housing Administration have relaxed income, credit and down payment requirements for easier qualification.
USDA and VA loans can often be obtained with zero down payment, while FHA loans require as little as 3.5%, and minimum credit scores for all three are generally lower than for conventional loans. There are limits to how much you can borrow with a government-backed loan, and mortgage insurance — protection for the lender if you default — may be tacked on to your monthly payment.
Not all lenders offer FHA, VA and USDA home loans or their options may be limited, so always ask about availability when comparison shopping.
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