Mortgage Options For First-Time Homebuyers

Mortgage Options For First-Time Homebuyers For 2023

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this blog, we will cover the different types of mortgage options for first-time homebuyers for 2023. We are navigating the stresses of being a first-time home buyer in a competitive rate market. Buying a home is always challenging, especially if you are a first-time homebuyer!  Gustan Cho Associates are experts in helping first-time homebuyer clients navigate the difficult real estate market.

We do all we can to help their offers stand out and win the bid! We help hundreds of clients buy their first home every single year. In this blog, we will detail some amazing mortgage programs offered for first-time homebuyers, how to prepare to apply for a mortgage as a first-time homebuyer, and the instructions to apply with our team as a first-time homebuyer.  

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The Steps To Take on Getting Pre-Approved For a Mortgage and Buying Your First Home

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I am writing this article as a seasoned mortgage professional, but when I purchased my first home, I was not in the mortgage industry and needed to be more knowledgeable on how the homebuying process worked. Being a first-time homebuyer is a scary task. First, let us describe what it means to be a first-time homebuyer. If you have never purchased a home, you are a first-time homebuyer. Wendy is giving the following advice to first-time homebuyers:

What you may not know is, according to mortgage agencies, a first-time homebuyer is considered any individual who has not purchased a home in the previous three years or 36 months (this includes owning a primary home, secondary home, or an investment property). To qualify for many first-time homebuyer programs, all borrowers on the mortgage transaction must qualify as first-time homebuyers.

 Mortgage Options For First Time Homebuyers With Down Payment Assistance

Please keep in mind that some special grants in down payment assistance programs only require one first-time homebuyer on the mortgage application to qualify for that program.

Each specialty grant or down payment assistance program will have different qualifications. Please send any information to our team to ensure we can utilize a specialty program or local grant. 

Using Non-QM and Non-Prime Mortgage Options To Buy a House

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In this section, we will cover and discuss traditional and non-prime mortgage options for first-time homebuyers for 2023. 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

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?

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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

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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.  Florida has always been the number one place of choice for retirees. Home prices in Florida have been skyrocketing since the Financial Crisis of 2008. Tens of thousands of Americans move to Florida to call it their new home. Florida has thousands of job opportunities for out of state workers. Both private and government jobs are available with great wages and benefits. Homebuyers in Florida can still find reasonably priced homes. In the following sections, 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 2023?

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.

Mortgage Options for First-Time Homebuyers for 2023

Will The Housing Market Crash in 2023?

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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

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 

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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

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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?

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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 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

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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.

Mortgage Options for First-Time Homebuyers for 2023 Plans

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?

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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.

Getting Approved For a Mortgage Loan For First-Time Homebuyers

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

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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 210 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

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

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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 or call us at 800-900-8569. 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.

What Is a First Time Home Buyer?

A first time homebuyer is a homebuyer who did not have any ownership in a home in the past three years. First time homebuyers are not just buyers who never owned a home. The best mortgage loan program for a first time homebuyer are FHA loans. FHA loans require a 3.5% down payment with a credit score of 580 FICO. Homebuyers with credit scores down to 500 FICO are eligible for an FHA loan.

As a first-time homebuyer, we do not want you to feel like you are on your own in this process. The loan officers and support staff at Gustan Cho Associates are here to help. Being a first-time homebuyer should be an incredibly exciting and rewarding time in your life. Buying a home is a daunting but rewarding task. Buying a home can be a financial move that can set you up for long-term success.

Best First Time Home Buyer Mortgage Loan Options

One of the frequently asked questions at Gustan Cho Associates is what are some programs currently being used by first-time homebuyers Many first-time homebuyers utilize low, down payment mortgage options. Saving for a down payment can be one of the hardest parts of the mortgage process, especially in today’s financial climate, where the cost of all goods and services is higher than ever.

Without out-of-control inflation, saving for a large down payment cannot be easy. This is why many first-time homebuyers utilize an FHA mortgage loan to purchase a home. With a credit score above 580, an FHA mortgage loan will only require a 3.5% down payment.

Buying a House With a VA Home Loan

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If you are a veteran or an active duty military service member, you can purchase your first (or subsequent) home without any down payment. This is a major benefit to the brave individuals to serve our country. Depending on where you are purchasing a home, you may utilize a USDA mortgage loan that would not require a down payment.

Please note that a USDA loan is only available in select national rule areas. Please reach out to Mike Gracz at 630-659-7644 to go over USDA-eligible areas. Access to low down payment options is key for first-time homebuyers to enter the housing market. Gustan Cho Associates offer all VA, FHA, and Conventional loans without additional lender overlays. We are a one-stop shop for mortgage options and educating first-time homebuyers.

Buying Your First Home With a Conventional Loan?

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What about a conventional loan as a first-time homebuyer? A popular program that flies under the radar is a conventional mortgage loan with a low 3% down payment option. Many mortgage borrowers must know that Fannie Mae and Freddie Mac offer a low-down payment option for first-time homebuyers. The down payment requirement is even lower than an FHA loan. Fannie Mae and Freddie Mac have offered this program for many years, but it is underutilized. 

A few qualifications for the 3% down first-time home buyer conventional mortgage loan. This program is only available in a single-unit primary residence. The property can be a single-family home, condo, or PUD, but not a manufactured home. A first-time home buyer may use a fixed-rate or an adjustable-rate mortgage with a maximum term of 30 years.

Can You Get a Conventional Loans With 3% Down Payment?

First time homebuyers can get a conventional loan with a 3% down payment. You need to meet Fannie Mae or Freddie Mac conforming loan guidelines with a 620 credit score. You must have at least one month of mortgage payment in the bank, sometimes more, depending on AUS, which may come in the form of a gift.

Even with only requiring a 3% down payment, Fannie Mae and Freddie Mac. Also, allow you to combine subordinate financing with eligible community second mortgage loans. Please reach out to our team for more information on these qualifications. Fannie Mae offers a program called HomeReady that can save even more money using this low-down-payment option.

HomeReady Conventional Mortgage Loan Option

In order to qualify for the HomeReady option, your income limit is 80% of the average median income in your area. This information is tracked by the census and can be found on the following website. As of today, as long as your income is below 80% of the average median income, you can qualify for the money-saving or down payment option.

There are talks in the industry trying to get this income threshold changed as Fannie Mae and Freddie Mac realize how hard it can be for first-time homebuyers to enter the housing market. There are talks of raising this to 125% of the average median index. When that announcement. If and when that announcement is made, our team will update our readers.

Best Lenders For First-Time Homebuyer Mortgage Options

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Since Gustan Cho Associates deal with so many first-time homebuyers, we consider ourselves first-time homebuyer experts. Whether you have spoken to other lenders or are looking for basic information, our team is here to help. To start the process, first reach out to Mike Gracz at 630-659-7644.

Branch Manager of NEXA Mortgage, LLC. dba Gustan Cho Associates. Mortgage broker licensed in 48 states headquartered in Chandler, Arizona and regional branch based in Oakbrook Terrace, Illinois. We are experts in FHA, VA. USDA, Conventional Loans. National reputation for its no lender overlays on government and conventional loans. We also have a large wholesale lending relationships with dozens of lenders of FHA 203k Loans, Reverse Mortgages Jumbo Mortgages, Non-QM mortgages, Bank Statement Mortgage Loans for self employed borrowers, and alternative financing. Gustan Cho NMLS 873293 and the team at Gustan Cho Associates is nationally known for being able to do loans other lenders cannot do.

Mike will answer any of your basic homeownership questions and go over which loan program may be best for you. After your initial one-on-one, first-time homebuyer consultation, Mike will pair you with a licensed loan officer in your state. When dealing with your licensed loan officer, be as detailed as possible with your qualifications. Your licensed loan officer will send you an application link to apply for a mortgage. That application link will then give you a secure portal to upload your income and asset documentation.

How To Start The Pre-Approval Mortgage Process

The mortgage process is simple and streamlined online. Your assigned loan officer at Gustan Cho Associates, Inc

Once your loan officer receives the completed online application, they will verify your tri-merged credit scores. They will then be able to utilize your income and asset documentation provided and issue you with your very first pre-approval letter. If for some reason, your qualifications don’t work at this time, your loan officer will put together a detailed financial plan to help you qualify for your first home as soon as possible. Our team has worked with many first-time homebuyers and is here to help you through the entire process.

All indications look like 2023 is going to be a rough financial year for all Americans. As a first-time homebuyer, keep this from buying a home. Buying a home is usually a better financial option than renting a home when looking at the long-term picture. While interest rates may be inflated today, when they do drop in the future, you can always refinance your mortgage loan.

Best Mortgage Lenders For First Time Homebuyers With Bad Credit

As a first-time homebuyer, it is incredibly important to stay within your realistic monthly budget and prepare for unexpected costs that you may need to fix on your very first home. You will no longer have a landlord to call when something breaks. Even if underwriting guidelines may qualify for a maximum monthly payment, there may be better options for your monthly budget. Keep in mind that the costs of property taxes and homeowners’ insurance are on the rise.

An increase on your property taxes and homeowners insurance will have an effect on your monthly mortgage payment. We strongly encourage you to take advantage of the housing market as we start to see the buyers’ market start again. For more information on programs available for first-time homebuyers or any general mortgage questions, please reach out to our team today. You may also reach out to us directly at team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays. 

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