First time home buyers will have an assortment of home mortgage options in 2023. With interest rates starting to come back down, 2023 is looking to be a great time to purchase. Below we will talk about the most popular First-time buyer loans in 2023, if you have questions, please call us at ph: 888-705-1975
FHA Mortgage: The most popular first-time buyer program remains the FHA loan. The FHA loan is a government backed loan and one of the easiest types of mortgage loans to qualify for. In addition buyers can have less-than-perfect credit and still qualify. Below we have listed the benefits of the program, and things to consider.
- FHA are great because they allow a maximum of 96.5% financing, the home buyer only needs a 3.5% down payment. This can be a big plus for first time home buyers since they often don’t have a lot of money set aside specifically for purchasing a home.
- The FHA program permits the home seller to pay buyers closing costs – up to 6 percent.
- The down payment money can come from a variety of sources including HUD down payment assistance grants.
- The down payment money can also come from a gift from a family member, etc.
- Those with “so so” credit may still be able to qualify: For traditional mortgages, a borrower will generally need a minimum credit score greater than 640. FHA loans are much more tolerant of lower credit scores, requiring a minimum score of just 580. However, a 620 credit score will be needed for the max 96.5% financing.
- FHA also permits generous debt-to-income ratio limits, higher than any other loan program. Please learn more about FHA loans here.
USDA Rural Housing Mortgage: Like FHA, this is a government-backed home purchase program. The big advantage of the USDA loan is the program allows for 100 percent financing. But there’s a catch, the home must be located in a USDA rural defined area, and the family income must be below a certain limit. Let’s talk more about the details below.
- USDA Loans require NO payment up to 101% financing in select eligible areas. The extra 1.0% is for the USDA upfront guaranteed fee.
- Reduced monthly mortgage insurance costs (PMI) when compared to other loan options like FHA. Nearly half the costs.
- USDA closing costs can often be included or rolled into the loan with higher appraisal. Closing costs can also be paid by the seller up to 6 percent.
- No early payoff penalty.
- There is NO maximum loan amount with the USDA program. Homebuyers are approved based on debt to income
- You do NOT need assets to qualify for USDA loans. No minimum requirements on bank savings.
- Qualifying for a USDA loan with lower credit scores is possible. Please note our current min required credit score is 620.
- USDA mortgages are secure 30 year fixed rate terms at low market interest rates comparable to FHA and Conventional home loans.
- USDA loans are for ANY new & existing single-family residence located in a Rural Development eligible area. See the USDA address lookup map here. The home being purchased can be a regular sale, short sale, foreclosure home, bank owned, etc.
- The USDA housing program is NOT solely reserved for first-time home buyers. Move up buyers can use the USDA program.
- Household income must be below the 2023 USDA income limits. Read more about USDA rural loans here.
VA Mortgage: If you have VA benefits, and little money to put down on a home, this is the option for you. The government VA program offers 100% financing for approved military families and Vets.
- 100% financing for new home purchases. VA even offers 100% cash out refinance for home owners that currently have a VA loan.
- No mortgage insurance – PMI required. This is perhaps the best benefit of the VA loan.
- No prepay penalty ever.
- Secure 15 or 30-year fixed rate terms.
- VA mortgage interest rates are the lowest of any loan program available today.
- VA loans have similar closing costs to other loans, even though they offer 100% financing. The home seller can pay buyers closing costs as well.
- The one-time funding fee is charged like all Government home loans – but it can be added to the loan just like the USDA and FHA loans.
- Loan amount limits up to $2m- select high costs locations higher.
- VA offers an assortment of refinance options should interest rates go lower, or the homeowner wants to cash out some equity down the road.
- VA 100% home loan can close in as little as two weeks.
- Perfect credit scores are required, buyers with credit scores down to 600 may be approved. Learn more about the latest 2023 VA loan guidelines on the loan programs page.
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