Cheap Home Loans for First Time Buyers

First time buyers in today's market have some unique opportunities.  Despite having historically low interest rates it is still considered a buyer's market.  This means that homebuyers have plenty of options and sellers are offering incentives and concessions to attract buyers.  First time buyers usually have limited funds and cheap home loans are a great help in purchasing a home.   Here you will learn about loan choices and also how to be sure you do not make any small mistakes than could cause you a lot of stress during your home buying process. 

During the real estate boom many buyers were able to obtain 100% financing.  Even buyers with credit issues found it possible to purchase a home with zero down payment.  All that has changed since the collapse of the housing market.  Today it is rare to find zero down home loans.  Also, buyers need good credit to get a conventional mortgage loan.  However FHA financing is an option for those with less than perfect credit and limited funds for down payment.  FHA loans have fast become the most popular financing option for first time buyers.  This financing allows buyers to purchase with as little as 3.5% down payment.  The down payment can even be a gift from family or friends.  The seller is also allowed to contribute to the buyer’s closing costs.  However, to qualify for FHA financing the home must meet certain standards.  An FHA appraiser will be sent by the lender to determine if the home is in good livable condition.  Should the FHA appraiser find any issues, the seller will need to make the repairs.  In today’s market sellers are more than willing to put in some sweat equity to get their home sold.  Most buyers find they have no trouble getting their seller to satisfy the deficiencies cited by the appraiser.

FHA loans, while insured by the government, can be obtained from any FHA approved lender.  You can visit hud.gov to check for a list of lenders in your state.  Interest rates may vary from lender to lender so be sure and shop around. 

If you are a veteran or active military duty personnel than you can obtain VA financing.  VA loans are guaranteed by the government, but can obtained from a VA approved lender, much like FHA loans.  The best benefit of a VA loan is that there is no down payment required.  This is ideal for first time buyers with limited funds. 

The conventional mortgage loan is a great option if you can qualify.  Conventional loans allow as little as 5% down payment.  They also have the best interest rates.  If you have good credit and income documentation then the conventional loan is the best of the cheap home loans. 

The home search process can be an extended process.  During this time it is very important to not make any changes to your financial situation.  Remember not to miss any payments on your bills, not to make any large purchase on your credit card and not make any changes in your employment.  Missing a recent payment could result in a large drop in your credit score and making a large credit card purchase will change your debt to income ratio.  Thereby you may no longer qualify for a loan you were initially approved for.    

Now you have an overview of the loan programs available and know to stay on top of your finances during the home buying process.   So, you are in perfect position to obtain one of the cheap home loans first time buyers strive for.