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1st Time Home Buyer Loans

Are you planning to buy your first home? If so you will be exploring how to get the best home loan. There are a variety of home loan programs that are appropriate when you are a first time buyer. When you get a home loan for the first time you will be concerned with the required amount of down payment. You will want to know how much your monthly payments will be and how to determine the right loan size so you know you will be able to afford your home purchase. This page discusses low down payment and no down payment first time buyer loan options.

Explore Low Down Payment and No down Payment Options

If the amount of savings you have for a down payment are not a concern (meaning you can put down 20% of the purchase price or more) then a Conventional loan (such as a Conforming 30 Year Fixed Rate loan, or a Jumbo fixed rate loan) would offer you the opportunity for the lowest overall financing costs.

For most first time buyers, the size of the down payment is a concern. If your savings that you can dedicate to a down payment (and closing costs) are limited then you may want to consider the following loan programs.

Conventional Loans with Private Mortgage Insurance

Conventional loans are the lowest-priced loans available and have the highest standards for credit quality. They also impose higher down payment requirements than the other programs discussed below. Conventional loans typically require a down payment of 20% or more, but down payments of as little as 10% can often be acceptable to lenders, as long as the loan is eligible for private mortgage insurance.

Private Mortgage Insurance ("PMI") is a type of insurance that lenders can purchase to protect them from loss if the borrower becomes unable to continue making monthly payments. If you want a conventional loan and if you are putting down less than 20% your lender typically will insist that PMI be obtained, which will add to the cost of your loan. In some cases this is still the lowest cost solution for a first time buyer, but your lender should also check to see if one of the loan programs discussed below might be cheaper for you.

FHA Loans

The Federal Housing Administration (FHA) is a government agency that has provided insurance against loan default since the 1930s. Lenders make loans that conform to FHA standards and obtain FHA insurance against the risk of default by the borrower. The cost of the insurance is paid by the borrower.

The biggest reason to consider an FHA loan is that you can make a relatively small down payment. At present the minimum down payment for FHA loans is only 3.5% of the purchase price, making this program ideal for first time buyers with limited savings. For more information about the FHA program click here.

Rates on FHA loans are comparable to those on conventional loans, while the cost of the FHA insurance adds a significant amount, both up front and each month. However, the overall cost of FHA loans is often lower than conventional loan costs when a low down payment is being made, and the loan is often easier to approve because all decision making on FHA loans rests with your lender.

In comparison, conventional loans that must carry PMI (due to a low down payment) require a second review by the PMI company.

VA Loans

VA loans, like FHA loans, are loans made by private lenders that are made according to government standards. In this case the standards are those of the Veterans Administration. Also like FHA loans, VA loans carry a form of government insurance to protect lenders against the risk of default. With VA loans the insurance is paid entirely by an up-front premium, which may be built in to the loan.

VA loans are available with zero down payment, making them very attractive to first time buyers. The catch, of course, is that you must be a veteran of U.S. military service in order to qualify for a VA loan. For more information about VA mortgage loans click here.

USDA Mortgage Loans

USDA loans follow the pattern of FHA and VA loans. Private lenders make the loan. The borrower pays an up-front mortgage insurance premium to provide protection for the lender against the risk of default. Like the VA loan program, USDA loans are ideal for first time buyers because no down payment is required. However there are a couple of significant limitations.

First, the property must be located in an area that the USDA considers "rural." We have access to the USDA "rural" maps so we can advise you if you want to know if a particular property may be eligible for this program.

Second, your total family income cannot exceed a certain limit (typically a little more than your county's median income level). For more details about the USDA loan program click here.

Calculate Rate, Payment, Loan Size

If you would like a current quote on any of the programs discussed above you may use our automated quote tool (at upper left) or you may call us for a live quote.

If you just want a quick, rough idea of how the numbers work, try our Home Affordability Calculator: