There are many loan programs that can benefit a first time homebuyer, but only a few that really do a good job. Government loan programs typically offer the best down payments and interest rates. These include: FHA, USDA and VA loans.

FHA Loans

FHA Loans typically are the most popular loan program for first time homebuyers. With only a 3.5% downpayment requirement (which can be gifted by a family member or relative), and higher debt-to-income ratio allowances (a buyer can have much higher debt on their credit report then a local bank would allow), these loans can be a sure thing for someone looking to go from renting to owning.

In addition, there is much lower monthly mortgage insurance payments on these loans then traditional loans, and this is because FHA charges a buyer a certain percentage monthly for (MI) and rolls the remainder of it into the loan amount. This is called the MIP funding fee.

FHA loans are offered by many mortgage companies and banks per state, but typically, you will want to go with a mortgage company that specializes in these government loan programs, for they tend to have a larger portfolio of programs and rates then a typical lender.

USDA Loans

USDA loans are also excellent loans for new homebuyers. If the house you find is zoned rural (and many small towns are), you may qualify for a USDA loan. Theses loans offer 0% down payments and have excellent fixed interest rates. There are maximum income levels on these loans however, but the more dependents a new buyer has, the more typically, they can earn and still qualify. See a qualified government mortgage specialist for details.

VA Loans

VA Loans or Military home loans have been an excellent first time homebuyer loan for many years. These of course are for military veterans or personnel only, but if you are one, and have been active at least 180 days, have credit scores of 620 or above, you may qualify. If you haven’t been active for 180 days but been in the military reserves for at least 6 years, then you still can qualify.

These loans also offer 0% no money down financing and excellent interest rates. Also, VA loans have no monthly (PMI) Private mortgage insurance requirements and thus can have some of the lowest monthly payments for first time home buyers.

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