First Time Home Buyers Loans and Programs in US


Getting the very first mortgage of your life can be an intimidating thing for many first-time home buyers. However, with plenty of different options available, it is now easier to get a mortgage as a first-time home buyer as never before.

Below, we will discuss the available mortgage options for first-time home buyers, their benefits, and how they might apply to your situation.

Let us begin

Types of First-Time Buyer Loans Available

FHA (Federal Housing Administration) Loan

FHA loans are the most popular options for many first-time home buyers because of two main reasons: low down payment and a relatively versatile credit requirements.

The FHA loan is a mortgage insured by the FHA, and issued by an FHA-approved lender for low-to-moderate income borrowers. This is why the minimum requirement to get an FHA loan are “just” a 500 FICO score and down payment of 10% of the house’s value.

However, most FHA-approved lender will only approve loans from borrowers with a 580 credit score, where only 3.5% of down payment is required.

Conventional Loan

This is probably the preferred option if you have cash upfront to put down a 20% down payment or above. There are two main benefits of getting a conventional loan over a FHA loan: first, you are exempt of the need to pay PMI (private mortgage insurance) with a conventional loan when you put down 20% down payment. With a FHA loan, you’ll need to pay PMI no matter the amount of down payment is.  PMI can cost you thousands of dollars each month, so you’ll save a lot of money.

Second, since you put more money down, the overall interest costs are usually lower in the long run. 

Take notes, however, that you will need at least 640 credit score in getting a conventional loan.

Conventional 97 Loan

Also sometimes called Fannie and Freddie 3% down loan, because it is a loan type invented by Fannie Mae and Freddie Mac to compete with FHA loan’s low down payment requirement. In this type of loan you are only required to pay 3% down payment, although you will need a relatively high credit score of 620. However, many lenders will only approve those with at least 680 credit score if you only want to put down 3% down payment.

Obviously, the biggest highlight of this loan type is the very low down payment requirement, and can be a good option for those lacking in cash at the moment but are confident to pay the mortgage payments.

VA (Veteran Affairs) Loan

A mortgage loan program guaranteed by the United States Department of VA, and is especially designed for american veterans.

If you are a U.S. veteran, you are eligible for a VA loan and in most cases, it will be your best options due to three main benefits:

  • No down-payment requirements, you can buy the house with literally 0%
  • Low closing costs and no insurance requirements (including PMI)
  • Very flexible credit and income requirements

The VA loan is the cheapest type of mortgage available today, but not available for everyone.


A type of loan designed for low-income buyers in rural areas, guaranteed by the USDA (US Department of Agriculture). This mortgage program allows you to qualify without no down payment at all, and with a very low mortgage rate of just 0.35%.

However, this loan is only available if the house is located in a USDA-eligible area. 

FHA 203k Loan

A mortgage plan combined with a renovation loan, this is the loan to get when you want to buy a fixer-upper. With this, you get a loan to finance the property and also to cover the home improvements and repair costs. The requirements are relatively similar to traditional FHA loans with just 3.5% down payment.


FHA Energy Efficient Mortgage program is quite similar to the 203k loan where you get extra money besides the price of the house. However, in this EEM loan the extra budget must go to energy efficient home improvements like LED lights, smart home devices (smart thermostat, smart switches), solar panels, and additional insulations among others.

Tips For First-Time Home Buyers To Get The Best Loan Option

1. Get Your Credit Report and Know Your Credit Score

Get a copy of your credit report from Equifax, Experian, and Transunion—the three major credit agencies—. You can get this copy for free at, a US government site. 

However, this site won’t give you your credit score, but you can use sites like Wallet Hub or Credit Karma that will show your credit score (along with your credit report) for free.

Check these reports, and make sure there are no errors in information (late payments that shouldn’t exist, inaccurate information, accounts that don’t belong to you etc.). You can contact the credit bureau directly if there’s any error in your respective report.

2. Improving Your Credit Score

Since credit score is a very important factor in getting approved for a mortgage, it is wise to make your score as high as possible before applying for one. Here are some practical tips to quickly improve your credit score:

  • Don’t apply for new lines of credit, including new credit cards. Any application for credit will be accounted as a hard credit inquiry, which will lower your score, and will also add a new debt to your report.
  • Pay down credit card. In general, you should aim to pay your balances until they are just 10-15% of the cards’ limit.
  • Pay your bills on time, every time. If you just made a late payment in the past couple of months, it is generally better to wait for a few more months before applying for a mortgage.

3. Work With a Professional Realtor

It is a common misconception for first-time homebuyers that hiring a real estate agent will cost more. However, the realtor’s cost is paid by the seller and included in the price of the house.

A professional, experienced real estate agent can help negotiate the best mortgage options for you, while also help smoothing the home buying process.

End Words

With plenty of different options available, getting a mortgage as a first-time buyer is now relatively easy. The most important things to consider is your credit score, and how much money you have available to put down a down payment. Also, it is important to work with an experienced realtor to help you negotiate the best possible deal.

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