Mortgage Options For First-Time Homebuyers For 2022

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this article, we will cover and discuss traditional and non-prime mortgage options for first-time homebuyers for 2022. The housing market in many states has been surging for the past several years. With the tremendous increase in housing prices, many landlords have been increasing rents for tenants. Despite the skyrocketing inflation numbers, the uncertainty of the stock market, many employers downsizing due to lack of inventory, mortgage companies cutting tens of thousands of jobs due to the uncertain financial markets, and skyrocketing rates, the housing market remains strong.

States With The Highest Demand For Homes By First-Time Homebuyers

There is more demand for homes than inventory. Home prices are stronger than ever in low-taxed states such as Florida, Tennessee, Arizona, Georgia, Alaska, Wyoming, Idaho, Colorado, North Dakota, South Dakota, North Carolina, West Virginia, South Carolina, Mississippi, Alabama, Texas, Iowa, and Wisconsin. Other states with higher taxes like California, New Jersey, Maryland, Connecticut, Vermont, Delaware, and a handful of others still have strong housing markets. The bottom line is Americans, especially first-time homebuyers, are waking up that if they do not buy a house now, they may get priced out of the housing market and may never be able to own a home.

What Mortgage Is Best for First-Time Homebuyers?

What goes up normally comes down, right? One of the biggest fears of first-time homebuyers is whether or not we will have another housing crash similar to the one we had in 2008.  Let’s take the example of Florida, which has one of the hottest housing markets in the nation today. Florida was one of the hardest-hit states in the nation by the 2008 Real Estate Meltdown. Cities like Miami, Boca Raton, Naples, Tampa, Palm Beach, Orlando, Sarasota, and Jacksonville have been hit hard by the Great Recession of 2008.

How The Florida Housing Market Changed After The 2008 Housing Market Crisis

Home values in Florida have been increasing double digits from the late 1990s every year until the real estate market crash put an end to it. Florida real estate values started plummeting like never in state history. Florida was one of the most disastrous free falls in real estate history. Countless Floridians filed for bankruptcy and lost their businesses, lost their jobs, lost their homes. Countless Florida homeowners were left with homes with Negative Equity. In this article, we will discuss and cover how first-time home buyers can qualify for a mortgage with bad credit.

Will The Housing Market Continue To Grow in 2022?

Right around 2010 is when the Florida Housing Market started to recover. The good news is that every year since the recovery of the Florida housing market, there does not seem like there will be a correction. Many Florida homeowners who cling on to their Florida homes with underwater mortgages have not just recovered but were rewarded big time. Florida, as well as dozen other low-taxed states, have housing markets that are booming with absolutely no sign of a housing correction. Homebuyers who were waiting for a housing correction a few years back are scratching their heads and are panicking they will miss out on the housing market to purchase a home.

Will The Housing Market Crash in 2022?

Nobody has a crystal ball or can tell the future. Can the housing market keep on going up? Will there be a market correction? Will a market correction be worse than the 2008 real estate crisis and banking meltdown? When is the right time to buy your first home? All of these questions are great questions with no solid answers. Unless you are a fortune-teller or the New Nostradamus, nobody can get you facts-checked answers to these common frequently asked questions we get daily at Gustan Cho Associates. Many who thought they could never sell their Florida homes after the market collapse saw that now they do not just have options to sell their homes, but they can sell them at a huge profit. Homebuyers who purchased homes in Florida in 2010 have seen high appreciation.

Mortgage Options For First-Time Homebuyers With Bad Credit

how to buy a home in florida with a bad credit

FHA loans are the most popular residential home loan program for home buyers with bad credit. Buying a home, especially for First time home buyers with bad credit can be very confusing and intimidating. First-time homebuyers can qualify for a mortgage after bankruptcy and/or foreclosure. Applying for a home mortgage is not as difficult as one was to assume. Qualifying and applying for a home mortgage is actually a simple task. Homebuyers need to be organized and involve accumulate a lot of documents.

FHA Loans For First-Time Homebuyers With Bad Credit 

Homebuyers can qualify for FHA loans with bad credit, no credit scores, outstanding collections, charged-off accounts, and credit scores down to 500 FICO. FHA loans are the most popular traditional mortgage options for first-time homebuyers. Recent college graduates with no credit scores can qualify for an FHA loan via manual underwriting. FHA and VA loans have the exact same manual underwriting guidelines for homebuyers during and after Chapter 13 Bankruptcy. You can have outstanding collections and charged-off accounts without having to pay them and qualify for an FHA loan. Per HUD mortgage guidelines, timeshare foreclosure is not considered a real estate foreclosure.

Mortgage Options For First-Time Homebuyers With a Timeshare Foreclosure

Under HUD 4000.1 FHA Handbook on FHA loans, a timeshare foreclosure is considered a defaulted installment loan and NOT a real estate property. Therefore, there are no waiting period requirements for a timeshare foreclosure. Timeshare foreclosure for FHA loans does not count as a housing event and is treated as an installment loan. The same with other mortgage loan programs. Fannie Mae, Freddie Mac, the Veterans Administration, and the USDA Rural Development all do not consider timeshare foreclosure as a real estate property foreclosure. Therefore no waiting period after a foreclosure applies. However, many lenders have overlays on timeshare foreclosure. Other lenders often treat timeshare foreclosure as a real estate foreclosure and not a defaulted installment loan.

Mortgage Options For First-Time Homebuyers During and After Chapter 13 Bankruptcy

The only two mortgage options for first-time homebuyers during Chapter 13 Bankruptcy are FHA and VA loans. There are no other mortgage options for first-time homebuyers other than FHA and VA loans while on Chapter 13 repayment plan. Homebuyers can qualify for an FHA and/or VA loan while on Chapter 13 Bankruptcy. Homebuyers can qualify for an FHA and/or VA loan during Chapter 13 Bankruptcy. You need to wait for 12 months and have made 12 months of timely payments after filing for Chapter 13 Bankruptcy. The bankruptcy trustee needs to approve the mortgage. One of the most asked questions at Gustan Cho Associates is how difficult is it for the bankruptcy trustee to sign off on a mortgage. My straight answer is super easy. Out of the thousands of homebuyers, we have helped while on Chapter 13 Bankruptcy, the team at Gustan Cho Associates has never had a single bankruptcy trustee deny a home mortgage while on Chapter 13 Bankruptcy repayment plan. There is no waiting period after Chapter 13 Bankruptcy on FHA and VA loans. FHA and VA loans have a two-year waiting period after Chapter 7 Bankruptcy.

What Is The Minimum Down Payment Required For First-Time Homebuyers?

The minimum credit score requirement to qualify for a 3.5% down payment home purchase FHA loan is 580 FICO. HUD guidelines require a minimum 3.5% down payment FHA home loan for borrowers with at least a 580 credit score. Homebuyers with credit scores between 500 to 579 FICO require a 10% down payment versus borrowers with a 580 FICO where only a 3.5% down payment is required. VA and USDA loans do not require any down payment. Lenders offer 100% financing on VA and USDA loans. Only eligible active duty, retired veterans, and spouses of deceased eligible veterans with a certificate of eligibility (COE) can qualify for VA loans. Besides no money down requirements, VA loans have no annual mortgage insurance premiums, no maximum loan limit, no minimum credit score requirements, and no maximum debt-to-income ratio limits.

VA Loans For Bad Credit and 500 Credit Scores

VA loans is hands down the best mortgage options for first-time homebuyers with bad credit and credit scores down to 500 FICO. Eligible veterans can purchase million-dollar homes with VA loans with credit scores down to 500 FICO and no maximum debt-to-income ratio caps as long as they can get an approve/eligible per automated underwriting system approval or manual underwriting. The key to getting an automated underwriting system approval is to have timely payments in the past 12 months. Manual underwriting guidelines require timely payments in the past 12 months. USDA loans offer 100% financing but only properties designated rural by the U.S. Department of Agriculture USDA Rural Development are eligible. There are maximum household income restrictions. The debt-to-income ratio caps on USDA loans is no greater than 29% front-end and 41% back-end DTI.

Mortgage Options For First-Time Homebuyers With Low Credit Scores

Borrowers with credit scores below 580 and down to 500 FICO, can qualify for an FHA loan with a 10% down payment versus a 3.5% down payment for homebuyers with at least 580 credit scores. Non-QM loans are great mortgage options for first-time homebuyers with bad credit. However, non-QM loans require a 10% to 30% down payment. Non-QM mortgage rates are generally higher than rates on FHA loans. Non-QM loans, also referred to as non-prime loans, accept non-QM jumbo loans with lower credit scores, recent late payments in the past 12 months including mortgage late payments, and credit scores down to 500 FICO. Unpaid collections and charge-off accounts do not have to be paid in order to qualify for FHA home loans. We have a large variety of first-time home buyer programs and resources to help our clients make the right choices.

What Should You Do 6 Months Before Buying a House?

Serious first-time homebuyers often contact us at Gustan Cho Associates and frequently ask what should you do 6 months before buying a house? This is one of the best questions anyone can ask. It shows sincerity and commitment renters or previous homeowners are serious about buying a house in the near short term. One of the first steps to do 6 months before buying a house and qualifying for a home loan is to get qualified and see if you are pre-approved. If you are not qualified and/or pre-approved now, no problem. We have time to work with you to get you qualified and explore the various mortgage options for first-time homebuyers.

How Much House Can I Afford Versus How Much House Can I Qualify?

A very important question you need to ask yourself over and over is How Much House Can I Afford. NOT How Much House Can I Qualify? Lenders cannot answer this question because they do not count certain expenses when qualifying and pre-approving home buyers. Lenders only count traditional credit tradelines that report on credit bureaus. Utility bills, medical and auto insurance, college tuition, education expenses, daycare, elderly care, vacation budgets, hobby expenses, gas, landscaping and maintenance, and other non-traditional credit expenses are not used by mortgage lenders in determining how much house you qualify. The key is how much house you can afford and NOT how much house you qualify for. Think about how much house you can afford and take your time in going over your overall budget. The last thing you want is being housed rich and budget poor where all you are doing is working hard just to make the mortgage payment and nothing else.  One of the first tasks you should do 6 months before buying a house is to answer the following questions with your spouse and family.

Read More on How To Calculate Your Monthly Mortgage Payment

How To Prepare For a Mortgage 6 Months Before Shopping For a House?

In this guide, we will direct first-time homebuyers the right way so you will not be stressed during the homebuying and mortgage process. The ideal time to start preparing for a mortgage is six months prior to starting the mortgage pre-approval and the housing shopping process. Here are the steps for first-time homebuyers to take six months prior to shopping for a house:

  1. You should first and foremost start with a consultation with a loan officer.
  2. Have the loan officer pre-qualify you and/or your spouse if necessary
  3. Learn and understand the basic agency mortgage guidelines
  4. Learn the basic mortgage options for first-time homebuyers
  5. Go over your credit report and check for errors, credit disputes, and make sure positive credit tradelines are being reported and getting reported correctly
  6. Go over your finances and understand your budget
  7. Take your time coming up with the answer of how much you can afford versus how much you qualify
  8. Maximize your credit scores by asking your loan officer for help or by reading and studying our guide on  How To Rebuild Your Credit To Prepare For a Mortgage
  9. How much down payment and closing costs do you need and how long will it take you to save up for your down payment and closing costs.
  10. Start a reserve account for a rainy day as a homeowner
  11. Do not purchase a new car or make any high ticket purchases
  12. If you are qualified, your loan officer can issue you a pre-approval letter so you can shop for a home
  13. Shopping for homes will get you a better field of the necessities versus wants you like on your new home purchase
  14. Look around for areas and neighborhoods you may want to have your forever home

Mortgage Options For First-Time Homebuyers With Non-Prime Loans

Until recently, most mortgage companies did not have mortgage options for first-time homebuyers without qualified income, recent late payments, no credit, bad credit, non-QM mortgages one day out of bankruptcy and foreclosure, and non-QM jumbo loans. Non-QM loans are great mortgage options for first-time homebuyers without qualified income. Many first-time homebuyers may be self-employed where they have little to no adjusted gross income declared on their federal income tax returns due to a large number of unreimbursed business expenses. Gustan Cho Associates offers 12 months of bank statement mortgages with no income tax returns required.

Types of Mortgage Options For First-Time Homebuyers

The team at Gustan Cho Associates are experts in qualifying, approving, and closing first-time homebuyers with all different types of credit, credit scores, income, and debt-to-income ratio. Gustan Cho Associates is licensed in 48 states including Washington DC and Puerto Rico (Not licensed in New York and Massachusetts). We have over 170 wholesale mortgage lending partners including no overlays lenders on government and conventional loans and hundreds of mortgage options for first-time homebuyers with bad credit, no credit, and no traditional income.

Why Understanding Mortgage Options and Guidelines on Government and Conforming Loans Are Important

Our free first-time home buyers bad credit education program was designed to give home buyers the confidence and knowledge to attain home buying goals. Borrowers can qualify with minimal problems while saving money and taking the stress out of the mortgage process. In most cases, you will be able to receive a 1 one 1 session with one of our home buying education specialists. This program was designed to promote homeownership for first-time home buyers.

First-Time Home Buyers Frequently Asked Questions

What are frequently asked questions from home buyers for the first time

The following are some of the many frequently asked questions by first-time home buyers:

  • How much home can I afford?
  • How to overcome credit problems
  • How to buy a first home with bad credit
  • What’s the difference between FHA, Conventional, Jumbo,  and NON-QM mortgage loans?
  • What type of mortgage is best: fixed or adjustable?
  • Are all FHA Lenders the same?
  • What are FHA Lender Overlays
  • The pros and cons of using a buyer’s real estate agent
  • Should you use one?
  • How to know if you have REALLY found the right home

Most sessions can be held via telephone, email, or in-person and last only as long you wish them to. To schedule a session with one of our first-time home buyer education specialists, please contact us at Gustan Cho Associates at [email protected] or call us at 262-716-8151. Or text us for a faster response. The team at Gustan Cho Associates is available 7 days a week, on evenings, on weekends, and on all federal holidays. All of our clients will have access to loan officer’s cell phones. All of our loan officers work hard and our borrowers will never have any trouble in getting a hold of their assigned loan officer.