If you’re a first time homebuyer, crossing the finish line of the home buying process can be a substantial use of your time, energy, and money. Between the abundance of legal jargon, obscure paperwork, and it’s own mortgage terms dictionary, the amount of information presented to you in a relative short amount of time can be overwhelming. However, with the proper pre-education on the topic, it is possible to have an otherwise uneventful loan closing. Today, we dive into first time homebuyer programs that could be a beneficial product for your new home financing.
What is a first time homebuyer loan?
First time homebuyer loans are specifically designed to help first time home owners purchase a home. By qualifying for these special programs, a borrower may be eligible for reduced down payment requirements, reduced interest rate options, and limited fees.
How do I qualify for a first time home buyer loan?
A first time homebuyer is designated as a new buyer who is purchasing a home for the first time. In addition, you may still qualify if you have owned a home in the past, but have not owned a home in the last three years. For some options of the first time homebuyer loan program, there are also limitations on income earned and property value or location. To be sure you qualify, you’ll want to contact your local community bank or lender to complete the loan application process to ensure you qualify for these highly specialized programs.
Why are first time homebuyer loans beneficial?
Plain and simple, first time homebuyer loans make home ownership more accessible. Because they can offer lower down payment requirements, less fees, and a subsidized interest rate, the barrier to first time home ownership can be greatly reduced or eliminated all together. It’s no secret that the number one hurdle in buying a new home is the minimum down payment requirement. Programs like the first time homebuyer product allow the borrower to put less down, and get access to lower interest rates and less fees to boot.
What are potential downfalls to first time homebuyer loans?
Although generally very beneficial to borrowers, there are potential downfalls and challenges with using first time homebuyer programs. Because of the lower down payment requirement, you’re likely to be required to pay a higher percentage of mortgage insurance, a monthly fee that is tacked onto your mortgage payment when you have less than twenty percent (20%) equity in your home. There also could be restrictions on how soon you can sell your house after purchase, what type of programs will be available to you if you choose to refinance in the future, and whether or not you’ll need to occupy the residence as your primary residence.
Don’t get me wrong, while the benefits of first time homebuyer loans have been well allotted, it is in your best interest to explore all of your options at the time of purchase. Despite some drawbacks, there is a good chance that first time homebuyer loans could still be the most attractive loan option for you. Ask your loan officer to work up first time homebuyer and non first time homebuyer loan options for you so you can compare in writing the differences between the loans to ensure which option is the right choice for you to maximize your savings.