Leave a Message

Thank you for your message. We will be in touch with you shortly.

A Guide To First-Time Home Buyer Programs, Loans and Grants


A Guide To First-Time Home Buyer Programs, Loans and Grants

The home-buying process can be quite stressful. Though finding a new home can be an exciting adventure, navigating the rest of the process takes time, energy, and a lot of leg work. One of the most complicated parts of buying a home involves financing. Unless you pay cash for the property, you’ll need to find a lender and obtain a mortgage. The good news is that numerous programs, loans, and grants are available for first-time home buyers.

Get pre-qualified before you begin your search

While you might be eager to begin looking for Prescott real estate immediately, you’ll first need to sit down with a lender to get prequalified and see how much home you can afford. During this time, the lender will take your income information from your last two years of tax returns and pull a current credit report, showing them your FICO score and any current debts you have.

With this information, the lender can determine your income-to-debt ratio. They will then use this number to determine how much you can afford in monthly mortgage payments. Once this information has been collected, your lender will give you a paper telling your agent how much home you can afford. Once you’ve got this number, it’s time to start looking for a home!

However, the work has only begun. While searching, you’ll need to determine what kind of loan you’d like to get and fill out applications to see if you qualify for assistance or grants.

Down payment assistance is available for those who qualify

Most of the time, you will need to put some money down to get a loan. The amount of money you must put down as a downpayment depends on the type of loan you receive. A standard conventional loan requires the buyer to pay 20% of the home’s total price as a downpayment. This route has its advantages and disadvantages. On the one hand, putting down 20% means you won’t have to pay for mortgage insurance, thus lowering your monthly payments. At the same time, many first-time buyers don’t have the funds to put down 20% to fund their home purchases.

When conducting a home search, look into downpayment assistance for first-time borrowers. Aid is typically available via grants, forgivable loans, or repayable loans. If you qualify for a grant, you will be awarded a set amount of funds that will not need to be repaid. Low-interest second mortgages are also an option. Alongside the mortgage for your house, there will be a second loan meant to cover your down payment. This is an excellent alternative for first-time buyers who have yet to save money. However, these loans often cost more money in the long run, as you’ll be paying for two loans instead of one.

You can also use your IRA to finance your down payment. First-time buyers must use their funds within four months to avoid penalization for early withdrawal. Eligible individuals can remove up to $10,000 from their accounts. Before withdrawing from your IRA account, consult your financial advisor for valuable insight and solid advice.

First-time home buyer loans should be considered first

When getting pre-approved for a mortgage, ensure you speak with your real estate broker about loan types available for first-time buyers. These loans often boast less stringent requirements, and if you qualify for them, they may save you money and time. Any first-time buyer looking at Prescott real estate should review funding options with their mortgage broker to determine the best match.

FHA loans

One of the most popular loan types for first-time buyers is the FHA loan, or Federal Housing Administration loan, which offers aid to eligible borrowers with an easy-to-qualify method. An FHA loan may be a good fit if you don’t have a long-standing credit history or your score is lower than average.

FHA loans require a 3.5% down payment — a significant difference from the conventional loan’s 20%. This allows first-time buyers the opportunity to find a home without spending a lot of money upfront.

USDA loans

USDA loans are available for first-time buyers purchasing real estate in eligible rural areas in the United States. These loans typically have lower interest rates and a zero-percent down payment, making them an affordable option for many individuals seeking to buy their first property.

VA loans

VA loans are available for active military officials, veterans, and their families. This government-backed loan boasts many advantageous benefits for first-time buyers, including a lack of downpayment, low to zero interest rates, and more.

Government-sponsored loans

Fannie Mae’s HomeReady and Freddie Mac’s Home Possible are several conventional mortgage options for first-time buyers. These loans require a down payment of as low as 3%. To qualify, you’ll need to enroll in and attend a first-time home buyer course, which will cover the intricacies of purchasing and maintaining a home, from loan types and closing costs to property taxes.

Conventional loans

Conventional loans are mortgage loans that are eligible for seasoned and first-time buyers. Conventional loans often have stricter requirements, so they may not be a good fit if you have newer or less-than-ideal credit. You’ll need a minimum credit score of 620 and a debt-to-income ratio below 43% to qualify.

The bottom line

As a first-time buyer, you have numerous options to help you afford a home, from loans and grants to downpayment assistance. If you wish to buy Prescott real estate, you’ll greatly benefit from the guidance of an experienced realtor. A real estate professional like Peter Fife can use industry connections to connect you with reputable mortgage brokers who specialize in helping first-time buyers finance a home. With 27 years of experience and over 2,000 real estate transactions, Peter’s expertise can help you reach your goal of owning a home. Connect with Peter today to schedule a consultation and begin your first steps to homeownership!


Work With Peter