Five of the best loans for first-time home buyers that don’t require perfect credit scores.
A home is one of the biggest purchases you’ll make in your lifetime, and as a first-time home buyer, the price tag on your dream starter home can be intimidating. But what if we told you that didn’t have to be the case? There are actually several loans available to support first-time home buyers. Here are some of the best loans to help you purchase your first home.
An FHA loan is insured by the Federal Housing Administration and is best for buyers with lower credit scores. This loan is the most common among first-time home buyers and allows for smaller down payments. With a minimum credit score of 580, the minimum down payment required is 3.5%, or, if your credit score is lower, by putting down 10% of the down payment, you can qualify with a score as low as 500. With this type of loan, you will have to pay mortgage insurance, which protects the lender should you default on your loan.
Depending on your credit score, the Conventional 97 loan may be for you. Similar to an FHA loan, the Conventional 97 loan is a great option if you’re looking for a loan that requires a small down payment. With this loan, you need to have 3% of the down payment and a credit score of at least 620 to qualify. You will need to have mortgage insurance with this type of loan as well, but once you’ve built enough equity up on your home, you can cancel the insurance.
If you or your spouse are a member of the military or a veteran, then you may qualify for a VA loan as a thank you from the Department of Veteran Affairs. With this loan, no down payment is required, you don’t have to pay for any mortgage insurance, you will have low closing rates, and meet the credit score required by your lender. Not all lenders are authorized to give out this loan, however, so if you qualify for this loan, you may need to shop around for it.
If you’re looking to buy a home in a rural area, then the USDA loan is for you. These loans are backed by the United States Department of Agriculture, and if you qualify, you’ll see several benefits. With this loan, you don’t have to worry about having a down payment, but you do need to have a higher credit score — this varies by lender. You will also have to pay for mortgage insurance on this loan, but it’s cheaper than most loans.
Good Neighbor Next Door
Created by the United States Department of Housing and Urban Development, the Good Neighbor Next Door program is here to help teachers, law enforcement, firefighters, and other first responders get homes for a discounted price. HUD purchases homes in revitalized neighborhoods, and sells them to teachers and first responders for half the price, and for a $100 down payment. To qualify for this program, agree to HUD’s regulations for the program, and you must commit to live in the home for three years, which will be verified through annual certifications done by HUD.
There are several options out there to help you purchase your first home. Talk to your real estate agent, lender, or title company for guidance.