First Time Home Buyers Mortgage Guidelines And Requirements

This Article Cover First Time Home Buyers Mortgage Guidelines and Requirements

First Time Home Buyers Mortgage Guidelines depend on the individual loan program the borrower applies. The main concern most first-time homebuyers have is the down payment and closing costs. The down payment on a home purchase is fixed.

HUD requires a 3.5% down payment on FHA loans. Fannie Mae and Freddie Mac require a 3% down payment on conventional loans. A 5% down payment is mandated on seasoned home buyers on conventional loans. VA and USDA offer 100% financing. Therefore, there is no down payment requirement on USDA and VA Loans.

Non-QM and alternative financing loans require a 10% to 30% down payment.

Closing Costs on Purchase and Refinance Transactions

What are the costs of closing the purchase and refinancing transactions

All home purchase and refinance loan transactions have closing costs. Most of our purchase borrowers do not have to worry about closing costs. Closing costs can be covered by the seller’s concessions and/or lender credit.

We will cover the following topics in this article:

  • Down payment requirement
  • Closing costs on purchase and refinance loans
  • Agency guidelines versus lender overlays
  • Conventional loans
  • Government loans
  • First-time home buyer tips

First Time Home Buyers Mortgage Guidelines: Lender Overlays Versus Agency Mortgage Guidelines 

There are various mortgage programs for home buyers.

First Time Home Buyers Mortgage Guidelines depend on the individual loan programs. Borrowers need to realize that not all lenders have the same guidelines on FHA, VA, USDA, Conventional Loans. Just because a borrower does not qualify for FHA Loan at a bank does not mean they cannot qualify for an FHA loan with a different lender. All lenders need to meet FHA Guidelines on FHA Loans. However, lenders can have higher lending guidelines than agency minimum guidelines. The additional guidelines required by lenders are called lender overlays.

Gustan Cho Associates is one of the very few five-star national lenders with no lender overlays on government and conventional loans.

First Time Home Buyers Mortgage Guidelines On Down Payment Requirements

Most first-time homebuyers can easily afford their proposed monthly home mortgage payment. However, the issue most first-time homebuyers have is coming up with down payment and closing costs.

First Time Home Buyers Mortgage Guidelines On Down Payment Varies Dependent On The Loan Program:

FHA offers a 3.5% down payment for borrowers with at least a 580 FICO Score. Borrowers with under 580 credit scores down to 500 FICO can qualify for FHA Loans with a 10% down payment. Need to get approve/eligible per automated underwriting system. Borrowers who cannot get an approve/eligible but get a refer/eligible can be downgraded on FHA and VA Loans.

HUD guidelines are the easiest and most lax when it comes to getting an automated underwriting system with bad credit and high DTI.

Conventional Loans

Conventional loans are the most popular loan program in the United States. Fannie Mae and Freddie Mac set the standards on conventional loans. Gustan Cho Associates offers conventional loan programs for first-time homebuyers.

First Time Home Buyers Mortgage Guidelines On Freddie Mac Home Possible

Freddie Mac’s Home Possible has a 3% down payment mortgage program.

Freddie Mac Home Possible loan program was created. It was launched to help first-time home buyers. Home Possible is also for move-up home buyers, and retired home buyers. 1% down payment on single-family homes. 5% down payment on 2 to 4 unit multi-family owner occupant homes. Sellers can contribute up to 3% in sellers’ concessions for home buyers closing costs. Freddie Mac Home Possible has a maximum income limit by borrowers. Borrowers must meet certain income limits with the Home Possible Mortgage program.

The Income and Property Eligibility tool can be used to determine if borrowers meet maximum income eligibility requirements.

First Time Home Buyers Mortgage Guidelines On Freddie Mac Home One

What are the mortgage guidelines for first time home buyers at Freddie Mac Home One

Freddie Mac’s Home One Mortgage Program requires a 3% down payment program. Freddie Mac’s Home One Mortgage is for first-time homebuyers. It does not have income limits or geographic area restrictions.

HomeReady Conventional Loans

The HomeReady Mortgage requires a 3% down payment:

  • Fannie Mae’s HomeReady program requires a 3% down payment loan program
  • This is for seasoned and first time home buyers

Here is the link to Fannie Mae HomeReady Eligibility Tool:

HomeReady’s Income Eligibility Lookup Tool

Government Loans 

Private lenders originate and fund government-backed loans at competitive rates and zero to low down payments. Government loans are partially guaranteed and insured by a government agency. There are three types of government loans: FHA, VA, USDA. Government loans are for owner-occupant primary residence loans only. Second homes and investment properties are not eligible for government loans.

FHA Loans

FHA Loans is the most popular loan program in the United States.

Sellers contribute up to a  maximum of 6% sellers concessions for homebuyer’s closing costs.

VA Loans

Lenders finance 100% LTV on VA loans:

  • VA does not require a minimum credit score requirement
  • There is no maximum debt to income ratio requirements

VA allows up to 4% sellers’ concessions.

USDA Loans

What are USDA Loans

Like VA Loans, USDA does not require any down payment on USDA Loans and offers 100% financing. USDA allows up to 6% sellers concessions by home sellers.

First Time Home Buyer Tips

Reserves help homeowners in an event of an emergency. You do not want to have zero money and become a homeowner. There are things homeowners need to purchase. Landscaping tools and yard machinery such as a lawnmower are often necessary and are not cheap. New homeowners may need new furniture and blinds throughout the house. Start saving for a down payment. Applying for new credit during the mortgage process can cause loan denial. Quitting your job and/or changing jobs can cause a loan denial or delay in closing. Avoid any high ticket purchases such as buying a new car or new furniture.

To qualify for a mortgage with a lender with no lender overlays, please contact us at Gustan Cho Associates if you have any questions at 262-716-8151. Or text us for a faster response. You can also email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

Leave a comment