Mortgage for First-Time Home Buyers

Mortgage for First-Time Home Buyers with Bad Credit

Gustan Cho Associates are mortgage brokers licensed in 48 states

This article will cover getting approved for a mortgage for first-time home buyers with bad credit. Most people renting a home or an apartment need to realize they do not need a 20% down payment and thousands in closing costs to purchase a home. Homebuyers can only need perfect credit to qualify for a mortgage. Prior collections and charged-off accounts do not have to be paid. However, timely payments in the past 12 months is key in getting an approve/eligible per the automated underwriting system. We will cover the following key topic in this article:

  • Who can purchase a home?
  • Can you qualify for a mortgage for first-time home buyers with bad credit?
  • Benefits of being a homeowner versus a renter.
  • How much does it cost to purchase a home?
  • Becoming first-time home buyers with bad credit

This article will cover the above five bullet points in buying your first home. We will discuss the steps to qualifying and getting pre-approved for a home. The team at Gustan Cho Associates are experts in helping you get a mortgage for first-time home buyers with bad credit.

Who Can Qualify to Purchase a Home

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Mortgage for first-time home buyers with bad credit considering purchasing a first home is possible. Home buyers can have prior bad credit to qualify for FHA loans. Borrowers can qualify for FHA loans with outstanding collections and charged-off accounts without having to pay them off. However, the key is that they need to have re-established their credit. Borrowers need to be timely on all of their payments in the past 12 months to get an approve/eligible per Automated Underwriting System Approval. There are many questions that they may face.
Mortgage For First Time Home Buyers With Bad Credit

Getting Approved For Mortgage For First-Time Home Buyers With Bad Credit

Mortgage for first-time home buyers with bad credit is possible.  They may get many feedbacks and opinions from friends, family, and co-workers about the advantages and disadvantages of buying a home.

More important than how much a lender qualifies you is how much house you can afford. Lenders do not take into account monthly debts that do not report on your credit report or your personal budget such as entertainment, utilities, schooling, day care, medical expenses, and children extra curricular activity expenses.

There are many questions about being a homeowner for people who never purchased a home. They may also hear horror stories in the press about the skyrocketing foreclosure rates and homeowners owning underwater homes. Underwater mortgages are where their mortgage balances are higher than the market value of their homes.

Biggest Benefits of Being a Homeowner Versus Renter

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The advantages of being a homeowner out weight the disadvantages. Homeownership is not for everyone. Some people do not want to be tied down to one particular town or area for an extended period. For those folks, owning a home would not be a good idea. However, if you plan on settling down in one particular community and calling it home, then home ownership offers countless benefits versus renting. Alex Carlucci commented about becoming a first-time homebuyer with little to no down payment and less-than-perfect credit.
Most renters do not realize that you do not need a large down payment and great credit to qualify for a home loan. You can qualify for a mortgage with less than perfect credit and with zero to 5% down payment.

Many renters do not realize that sometimes owning a home costs less than renting. Many renters think they need stellar credit and a large down payment to become homeowners. This is not the case either. Renters with credit issues may be required to put in two or three months’ security deposit to rent. The down payment on a home purchase is often equivalent to a security deposit or less.

Down Payment Required For Mortgage For First-Time Home Buyers With Bad Credit

All home purchases require a down payment. The down payment is a percentage of the overall home purchase price. The down payment requirements are different among the different mortgage loan programs. Dale Elenteny of Gustan Cho Associates said the following about buying a home with no down payment.

VA and USDA loans are the only two mortgage loan options that do not require a down payment.

To qualify for a mortgage, first-time home buyers with bad credit only need a 3.5% down payment. Many times, homebuyers with bad credit only need to show the 3.5% down payment. They do not come up with the full 3.5% down payment on an FHA Home Purchase. Homebuyers in Illinois can use the seller’s property tax proration credits towards the down payment.

How Much Closing Costs Is Required on a Home Purchase

How about closing costs?

How about closing costs? All home purchase and refinance transactions come with closing costs. Unlike the down payment, closing costs is different depending on each borrower, the type of loan program, the type of property, the city, the county, and the state.

Closing costs can vary anywhere between 2% to 7% of the home’s purchase price. All home purchase and refinance transactions come with closing costs. Closing costs are any costs and fees associated with the home purchase and refinance transaction. This may include the lender’s costs and all other third-party costs.

Home Buyers do not have to pay for closing costs. This holds as long as they can get a seller’s concession towards a buyer’s closing costs or a lender’s credit towards closing costs.

Benefits of Going From Renter To Homeowner

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The benefits outweigh the disadvantages of being a renter to a homeowner. Yes, there are disadvantages to being a homeowner. Homeowners are responsible for maintenance and repairs. Lack of mobility in moving whenever they want and needing to sell their home to make a move elsewhere.

The pride of homeownership outweighs the cons. For example, homeowners can paint and decorate their homes without having to get permission from the landlord. Homeowners can have a pet or pets without asking for permission or having to put in an additional security deposit. As a homeowner, they will be secure in their home where they do not have to fear the landlord threatening them that he will not renew the lease. Homeowners will no longer have annual rental increases.

The advantage of being a homeowner is mortgage payments will be fixed for the 30 years of the loan term. Property taxes and increases might increase. But mortgage payment will remain constant for the life of a mortgage loan with a 30-year fixed rate mortgage loan. Being a homeowner comes with tax benefits. Mortgage interest is fully tax-deductible on annual tax returns. Mortgage interest is the largest portion of monthly mortgage payments.

Can I Get Approved For Mortgage For First-Time Home Buyers

First-time homebuyers are in a situation now where many homes are selling below replacement value due to the real estate and mortgage collapse of 2008. Homeowners can get on the ground floor of their home purchase and realize potential capital appreciation on their home purchase.

You can never predict what the future will bring. Hopefully, you will be fine but you do not want to buying too much house where you will be struggling to make the monthly housing payment.

There are risks with real estate investments. The 2008 financial crisis drop home values like never before in history. Millions of homeowners are still hanging onto their homes that are worth less than the mortgage balance they owe. Nobody can predict the future. Homeowners have excellent odds that their home purchase will appreciate.

Homebuyers Can Qualify for a Mortgage For First-Time Home Buyers With Little to No Money Down

Can home buyers qualify for a mortgage with little or no money and bad credit

Remember that you do not need perfect credit or high credit scores to qualify for a mortgage. Homebuyers can qualify for a mortgage with as little as a 3.0% down payment on conventional loans. Homebuyers will lower credit scores can qualify for an FHA loan with a 3.5% down payment. VA and USDA loans do not require any down payment.

Closing costs can be paid by getting a seller concession from the home seller. One of our veterans, experienced mortgage professionals at Gustan Cho Associates, can guide you on purchasing a home with little or no money down.

If you need to qualify for a mortgage for first-time home buyers with bad credit who need to get approved with a lender licensed in multiple states with no overlays on government or conventional loans can contact us at Gustan Cho Associates at 800-900-8569. Or text us for a faster response. Borrowers can also email us at

This blog on mortgages for first-time home buyers was updated on March 17th, 2023

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