First-Time Home Buyer Loans

Under most mortgage programs, a first-time home buyer is someone who has not owned a home in the past three years. This means even if you owned a home previously, you may qualify as a first-time buyer if you have been renting for at least three years. This broader definition opens up first-time buyer programs to more people, including those who went through a divorce, a foreclosure that has been resolved, or who previously co-owned a home but are now buying on their own.

The best loan type depends on your financial situation. FHA loans are popular with first-time buyers because they require just 3.5% down and accept credit scores as low as 580. Conventional loans with 3% down are available through Fannie Mae HomeReady and Freddie Mac Home Possible programs, which offer lower mortgage insurance rates and the ability to cancel PMI at 20% equity. If you are a veteran, a VA loan with zero down payment is the best option. Your DirectLender.com loan officer will compare all options and recommend the one that saves you the most.

The total cash needed to buy your first home includes the down payment, closing costs, and reserves. On a $300,000 home with 3.5% FHA financing, your down payment would be $10,500. Closing costs typically run 2-5% of the loan amount, or $6,000 to $15,000. Some of these costs can be covered by seller concessions or lender credits. Many first-time buyer programs offer down payment assistance grants or low-interest second mortgages to help with upfront costs. In some cases, you can buy a home with as little as $5,000 to $10,000 out of pocket.

Yes, there are thousands of down payment assistance (DPA) programs available across the country. These include state housing finance agency programs, local government grants, employer-assisted housing programs, and nonprofit assistance. DPA can come as a grant (free money), a forgivable loan, or a low-interest second mortgage. Each program has its own eligibility requirements, often based on income, purchase price, and location. Your DirectLender.com loan officer can identify the DPA programs available in your area and help you apply.

Getting pre-approved involves submitting a mortgage application along with documentation of your income, assets, and credit history. You will need recent pay stubs, two years of W-2s or tax returns, bank statements, and identification. The lender reviews your information, pulls your credit report, and issues a pre-approval letter stating how much you can borrow. At DirectLender.com, you can start the pre-approval process online in minutes and often receive a decision the same day. A pre-approval letter makes you a stronger buyer when making offers on homes.