6 First-Time Home Buyer Loans and Programs

Options for First-time home buyers

Options for first-time home buyers reduce the cost of homeownership, including loans with low down payments and financing for fixer-uppers.

Becoming a homeowner can be a financially intimidating process, but there are several options from lenders and government sources designed to smooth the way. Qualified home buyers can secure loans with low down-payment minimums and participate in local buyer assistance programs. Some may even finance fixer-uppers that require more work but cost less upfront.

While a larger down payment (or even an all-cash offer) can make you a more competitive buyer, the conventional advice of saving 20% of the home’s value for a down payment is not a hard-and-fast rule. This is especially true if you qualify for a government-backed loan, meaning that you may be closer to a sufficient down payment than you think.

First-time home buyer loans and programs

Here are six first-time home buyer loans and programs that are worth exploring.

FHA loans

Loans backed by the Federal Housing Administration require just 3.5% down, making them a popular choice among first-time home buyers. According to the most recent federal data, nearly 73% of FHA borrowers put down less than 10% for loans originated in October and November 2021. However, if your credit score is under 580, you would be required to put 10% down. Loan limits will vary depending on where you live, with maximums ranging from $420,860 to $970,800 for 2022.

While you can technically qualify for an FHA loan with a credit score in the 500s, approved borrowers tend to have much higher scores. From January to November 2021, the average FHA borrower had a credit score of 678, according to data from ICE Mortgage Technology.

FHA loans also require mortgage insurance. This protects the lender’s stake in the loan if you default. Borrowers can pay an upfront premium as part of their closing costs and an ongoing premium as part of each monthly mortgage payment.

VA loans

The Department of Veterans Affairs helps service members, veterans and surviving spouses buy homes. VA loans are especially generous, often requiring no down payment or mortgage insurance. They also allow borrowers to have higher debt-to-income ratios — and qualify for larger mortgages — than some other loan programs.

While the VA itself doesn’t set credit or income requirements, individual VA lenders will have their own criteria. According to data from ICE Mortgage Technology, the average credit score of VA borrowers was 722 from January to November 2021.

The standard VA loan limit is $647,200 for 2022, though high-cost areas can have limits as high as $970,800.

USDA loans

This one may surprise you. The U.S. Department of Agriculture has a home buyers’ assistance program. And no, you don’t have to live on a farm to get a USDA loan. The program targets rural and some suburban areas and allows 100% financing by offering lenders mortgage guarantees.

There are income limitations, which vary by region. For households with fewer than five members, the standard income limit is $91,900 for 2022. For households with five to eight members, this limit grows to $121,300.

Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac are the engines behind the home loan machine, working with local mortgage lenders to offer a range of conventional loan products — some requiring very low down payments.

Fannie Mae’s HomeReady loan, for example, is designed for low-income borrowers with credit scores of 620 or higher (and preferably 680 or higher) and requires only 3% down. One advantage of this kind of loan is that borrowers could qualify to end their mortgage insurance once they’ve built up 20% equity in their home — unlike with FHA loans, where borrowers can cancel their mortgage insurance after 11 years only if they originally put 10% down.

Freddie Mac’s Home Possible loan is another product with a minimum down payment of just 3%. The loan is intended to serve “first-time home buyers, move-up borrowers and retirees,” and borrowers can apply sweat equity or funds from gifts, grants or loans toward the down payment and closing costs.

State first-time home buyer programs

In addition to these national programs, many state and local governments offer assistance to home buyers. Browse NerdWallet's list of state first-time home buyer programs to learn more.

Home renovation loan programs

Here are a few programs that allow you to get more for your homebuying dollar.

  • The Energy Efficient Mortgage program extends your borrowing power when you buy a home with energy-saving improvements or upgrade a home’s green features. If you qualify for a home loan, you can add the EEM benefit to your regular mortgage. It doesn’t require a new appraisal or affect the amount of your down payment. The program simply allows your lender the flexibility to extend loan limits for energy efficiency improvements.

  • FHA 203(k) loans are designed for buyers who want to tackle a fixer-upper. This special FHA-backed loan considers what the value of the property will be after improvements and allows you to borrow the funds to complete the project as part of your main mortgage.

  • The CHOICERenovation loan is a conventional loan program through Freddie Mac that allows you to finance both the purchase of a home and the cost of improvements, too, with low down payments.

  • HomeStyle from Fannie Mae is another conventional loan option for purchase-and-remodel projects. A 3% down payment is available to first-time home buyers.

» MORE: Use our mortgage calculator to find out your monthly mortgage payment.

We’ve listed six resources available to you as a first-time home buyer. Now, you can reflect on your own needs as a borrower when considering your options. Some loans and programs are a better fit for home buyers with low credit scores, for example, while others are tailored specifically for buyers in your area. If you qualify for one of these programs or products, they can help you get a home without draining your savings for a down payment, can assist you in navigating additional costs like mortgage insurance and can keep your payments low.

It's also important to have a real estate agent who understands your specific needs. Choose an agent who has experience with the loan product you've picked; they can craft your offer and show the seller you're a well-qualified buyer.

Selling Your House? Your Asking Price Matters More Now Than Ever

There’s no doubt about the fact that the housing market is slowing from the frenzy we saw over the past two years. But what does that mean for you if you’re thinking of selling your house?

While home prices are still appreciating in most markets and experts say that will continue, they’re climbing at a slower pace because rising mortgage rates are creating less buyer demand. Because of this, there are more homes on the market. And in a shift like this one, the way you price your home matters more than ever.

Why Today’s Housing Market Is Different

During the pandemic, sellers could price their homes higher because demand was so high, and supply was so low. This year, things are shifting, and that means your approach to pricing your house needs to shift too.

Because we’re seeing less buyer demand, sellers have to recognize this is a different market than it was during the pandemic. Here’s what’s at stake if you don’t.

Why Pricing Your House at Market Value Matters

The price you set for your house sends a message to potential buyers. If you price it too high, you run the risk of deterring buyers.

When that happens, you may have to lower the price to try to reignite interest in your house when it sits on the market for a while. But be aware that a price drop can be seen as a red flag for some buyers who will wonder what that means about the home or if in fact it’s still overpriced. Some sellers aren’t adjusting their expectations to today’s market, and realtor.com explains the impact that’s having:

“. . . the share of listings with a price cut was nearly double its year ago level even as it remains well below pre-pandemic levels.”

To avoid the headache of having to lower your price, you’ll want to price it right from the onset. A real estate advisor knows how to determine that perfect asking price. To find the right price, they balance the value of homes in your neighborhood, current market trends and buyer demand, the condition of your house, and more.

Not to mention, pricing your house fairly based on market conditions increases the chance you’ll have more buyers who are interested in purchasing it. This helps lead to stronger offers and a greater likelihood it’ll sell quickly.

Why You Still Have an Opportunity When You Sell Today

Rest assured, it’s still a sellers’ market, and you’ll still get great benefits if you plan accordingly and work with an agent to set your price at the current market value. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”

Mike Simonsen, the Founder and CEO of Altos Research, also notes:

“We can see that demand is still there for the homes that are priced properly.”

Bottom Line

Home priced right are selling quickly in today’s real estate market. Let’s connect to make sure you price your house based on current market conditions so you can maximize your sales potential and minimize your hassle in a shifting market.



The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

A Key To Building Wealth Is Homeownership

A Key To Building Wealth Is Homeownership

The link between financial security and homeownership is especially important today as inflation rises. But many people may not realize just how much owning a home contributes to your overall net worth. As Leslie Rouda Smith, President of the National Association of Realtors (NAR), says:

“Homeownership is rewarding in so many ways and can serve as a vital component in achieving financial stability.”

Here are just a few reasons why, if you’re looking to increase your financial stability, homeownership is a worthwhile goal.

Owning a Home Is a Building Block for Financial Success

A recent NAR report details several homeownership trends and statistics, including the difference in net worth between homeowners and renters. It finds:

“. . . the net worth of a homeowner was about $300,000 while that of a renter’s was $8,000 in 2021.

To put that into perspective, the average homeowner’s net worth is roughly 40 times that of a renter (see visual below):

The results from this report show that owning a home is a key piece to the puzzle when building your overall net worth.

Equity Gains Can Substantially Boost a Homeowner’s Net Worth

The net worth gap between owners and renters exists in large part because homeowners build equity. As a homeowner, your equity grows as your home appreciates in value and you make your mortgage payments each month.

In other words, when you own your home, you have the benefit of your mortgage payment acting as a contribution to a forced savings account. And when you sell, any equity you’ve built up comes back to you. As a renter, you’ll never see a return on the money you pay out in rent every month.

To sum it up, NAR says it simply:

“Homeownership has always been an important way to build wealth.”

Bottom Line

The gap between a homeowner’s net worth and a renter’s shows how truly foundational homeownership is to wealth-building. If you’re ready to start on your journey to homeownership, talk with a trusted real estate advisor today.


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Avoid the Rental Trap in 2022

Avoid the Rental Trap in 2022

avoid renting


Are you one of the many renters thinking about where you’ll live the next time your lease is up? Before you decide whether to look for a new house or another apartment, it’s important to understand the true costs of renting in 2022.

As a renter, you should know rents have been rising since 1988 (see graph below):


avoid renting 2

In 2021, rents grew dramatically. According to ApartmentList.com, since January 2021:

“. . . the national median rent has increased by a staggering 17.8 percent. To put that in context, rent growth from January to November averaged just 2.6 percent in the pre-pandemic years from 2017-2019.”

That increase in 2021 was far greater than the typical rent increases we’ve seen in recent years. In other words – rents are rising fast. And the 2022 National Housing Forecast from realtor.com projects prices for vacant units will continue to increase this year:

“In 2022, we expect this trend will continue and fuel rent growth. At a national level, we forecast rent growth of 7.1% in the next 12 months, somewhat ahead of home price growth . . .”

That means, if you’re planning to move into a different rental this year, you’ll likely pay far more than you have in years past.

Homeownership Provides an Alternative to Rising Rents

If you’re a renter facing rising rental costs, you might wonder what alternatives you have. If so, consider homeownership. One of the many benefits of homeownership is it provides a stable monthly cost you can lock in for the duration of your loan.

As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“. . . fast-rising rents and increasing consumer prices, may have some prospective buyers seeking the protection of a fixed, consistent mortgage payment.”

If you’re planning to make a move this year, locking in your monthly housing costs for 15-30 years can be a major benefit. You’ll avoid wondering if you’ll need to adjust your budget to account for annual increases.

Homeowners also enjoy the added benefit of home equity, which has grown substantially right now. In fact, the latest Homeowner Equity Insight report from CoreLogic shows the average homeowner gained $56,700 in equity over the last 12 months. As a renter, your rent payment only covers the cost of your dwelling. When you pay your mortgage, you grow your wealth through the forced savings that is your home equity.

Bottom Line

If you’re thinking of renting this year, it’s important to keep in mind the true costs you’ll face.


Connect with Partners Realty to see how you can begin your journey to homeownership today.

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