Before buying a house for the first time, one has to go through a lot of ups and downs and winding turns. By winding turns, and ups and downs, I mean the governmental and financial processes involved in the approval of home loans. But finally when the mission is accomplished, you feel on the top of the world. A first time home buyer is jittery about hundreds of things - finance, government, documentation, paperwork, house registration and what not. But these days the good part is, a lot of options are available for the first time home buyer, to choose from.
Types of Loans Available
Federal Housing Administration (FHA) Loans
It is the most widely used home loan option for first time buyers. What makes it a good option is its low down payment requirement - 3.5% and also the applicant does not need a smashing credit score. These two things make it the best option amongst all the first time home buyers. For a majority of fixed rate loans available to a first time home buyer, there is a fixed period of 10 to 30 years.
Conventional loan is a good option for people with excellent credit. First time home buyer in a conventional loan needs to pay the down payment ranging from 5% to 20% of the purchasing price of the house. But in case the first time home buyer has a high credit score, he/she can get an advantage of lower interest rates. Further, depending on the creditworthiness of the buyer, interest rates can also decrease.
FHA Housing and Urban Development Loan
This is an especially good choice amongst first time home loans for those keen on buying a FHA foreclosure home. Under this program, down payments as low as $100, small amount of repair escrow and around $ 2,500 for closing cost assistance is included.
Some more first time home buyer loans include Veterans Affairs Loans and United States Department of Agriculture Loans. These were basically the major Federal loans. Generally most of the home loans for first time buyers include very low or absolutely nil down payment, lots of grants, loan forgiveness and so on.
Problem with First Time Home Loans
First and foremost, you may not be able to use such kind of a loan, if you are aiming at comparatively expensive properties. The catch is to restrict a first time home buyer to properties on the lower end of the property scale. Another important thing is if you plan to rent the place, you cannot avail the benefits of the first time home buyers loans. Then, if you are thinking of checking out or are pondering over subsidized first time home buyer loans, there could be some glitches in that, like:
- If you sell of your home too soon, you would not be able to enjoy the benefits of this program.
- You might need to opt for a lower value home, which is not exactly what you are looking for.
- A first time home buyer may also have to part with an amount of increased home values, to contribute to the first time home loans or loan programs.
- Your choice of loan types could get scanty, may be a 30 year fixed rate mortgage.
Home loans for first time buyers are all more or less the same, at least the federal ones. But the fact that they all have some catches and hidden conditions cannot be ignored. So all said and done, chose the one which costs you the least interest as well as headache!