Buying a home for the first time might turn out to be an ordeal. Generally, first time home buyers never have enough money to pay the down payment - that's because they are usually living on rent, and normally use their savings to pay exclusive rents. This doesn't mean that buying a new house for existing owners has become easy. Most owners who bought houses using loan schemes 3-4 years ago, and owners which inherited a home, may not be in a very good position because the property values have decreased dramatically and will not yield them the amount that they have invested to own the home. The amount of money that they'll receive after selling their home will be used as a down payment for the new home. The good part is that federal and state governments have realized the financial position of first time home buyers, and have started several programs for their facilitation.
The Federal Housing Administration (FHA) provides loans to new home buyers on certain lenient terms. Most importantly, an individual needs to know that FHA home loan interest rates are governed by the same rules of conventional loans, and that means the FHA does not regulate the loan's interest rate. The credit score of a buyer will determine which program they is entitled for; in order to obtain maximum financing, the applicant should have a credit score of 580 or better. But in most cases, an upfront payment of 3.5% is also required, along with enough income to manage mortgage payments plus other household expenses. Consultation with a FHA loan expert is highly recommended in order to completely understand which program you qualify for, as exceptions do exist. Even if an individual is not eligible for an FHA loan, they may spend a year or so improving their credit score by making on-time payments.
The USDA Rural Development Single Family Program is an ideal first time home buyer program, but it only provides loans for low and very low income households, the only problem with this type of program is that if a house does not lie on their map of rural areas it will not be financed. This program is also known as the Section 502 Direct Loan Program, it provides 100% financing usually on a term of 33-38 years. The applicant should lie in between 50-80%, or in less than 50% of the AMI (Area Median Income). The applicant is also required to be earning an income sufficient to cover their monthly payments, taxes, insurance and other household expenses.
The Veterans Administration Home Loan Program is for current or ex-military servicemen, and this type of loan involves a private lender. The Veteran Administration (VA) provides security to the lender for the veteran. In case the veteran is unable to pay the loan, the VA might provide assistance. Loans through the VA involve a 0% down payment, absence of private mortgage insurance and penalty fees (in case of early pay-off of the loan), and are reusable. But this loan is dependent on the factors of income and credit of the veteran buyer.
Last but not least, the conventional loans by banks and brokers, which are set upon the credit score, amount of down payment, and high interest rates.
Author Resource:
Oliver Silverstones makes it easy for the first time buyer to find all the state and local first time buyer programs. He keeps a daily update of the lowest mortgage rates today , as well as providing great advice to avoid most first home buyer headaches.
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