Routing # 256078446
MORTGAGE KNOWLEDGE CENTER
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MORTGAGE
How to Choose the Right Mortgage for Your First Home
What you'll learn: Learn about the different types of mortgages and how to choose the one that's best for you
EXPECTED READ TIME: 8 MINUTES
Published: June 29, 2023
If this is your first time purchasing a home, deciding which financing option is right for you can be confusing. With different loan guidelines, down payment options, credit score qualifications, and fees, it can be hard to decipher which loan is best for your unique financial situation. Here, we made a list of some of the most affordable loan options for first-time homebuyers.
Best loan options for first-time homebuyers
There is a long-held belief amongst first-time homebuyers that you must put twenty percent down to purchase a home. In fact, according to the National Association of Realtors, 35% of consumers still believe they need a down payment of 16% to 20% to qualify for home financing, when in reality, the current average for a down payment is much lower and ranges between 6% to 7%.
While putting twenty percent down was the norm a few decades ago, many Americans today can’t afford to contribute that much toward a down payment. With home prices trending upward and the cost of living increasing, it is challenging to save a substantial sum. A twenty percent down payment helps avoid extra fees like mortgage insurance (MI) and private mortgage insurance (PMI) and decreases interest rates, but for some, it could take many years to save that much money.
There are many available mortgage options that require smaller down payments, and with some, you can put even as little as three percent down. With other types of loans, you might even be able to get a mortgage with no down payment at all. Plus, asking your loan originator to check with local or state housing programs can help determine if you qualify for any down payment assistance programs designed specifically for first-time homebuyers. These are the best loan options for first-time homebuyers.
- FHA Loan
Insured by the Federal Housing Administration, an FHA Loan usually has a minimum down payment of 3.5%. Applicants with a credit score as low as 580 are eligible to apply, and even if your credit score falls between 500 and 579, you can still apply for the loan as long as you can make a 10% down payment. - Conventional Loan
A conventional mortgage is a loan not insured by a government agency. Some of these mortgages offer a 3% down payment, but they typically require a credit score of 620 or higher. If your credit is in good shape, but securing money for a down payment is difficult, this loan is a great option. - USDA Loan
Available to homebuyers in eligible rural and suburban zip codes, this loan is offered by the United States Department of Agriculture, and is a zero-down payment mortgage. With low interest rates and no private mortgage insurance (PMI) premiums, this is an affordable option. - VA Loan
Insured by the United States Department of Veterans Affairs, VA Loans help qualified service members, Veterans, and eligible surviving spouses become homeowners. These loans typically require no down payment, have competitive interest rates, limited closing costs, no private mortgage insurance premiums, and are a lifetime benefit, meaning those who qualify can use this guarantee over and over again. - Renovation Loan
As a first-time homebuyer, you might not have the funds to afford your dream home or purchase in a desirable neighborhood. A renovation loan can give you the money to buy your first home, while hiring a contractor to make the desired improvements and repairs. You might even save some money in the process. - Down Payment Assistance
There are many down payment assistance programs for first-time, and low to moderate-income homebuyers that exist nationwide. This assistance exists in the form of grants and loans and can be used to cover down payment and closing costs.
If you’re looking to purchase your first home, there are many loan options and down payment assistance programs you may be eligible for. Don’t forget to speak to your loan originator to see which loan options are best for your financial situation. Now, it’s time to get excited about the upcoming responsibilities and fun that being a homeowner brings!
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Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.625 discount point, which equals 0.625 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
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