First Time Home Buyers Loan - Rhode Island Real Estate Services
CategoriesRhode Island Real Estate, Tips & Insights

How Does a First Time Home Buyers Loan Work?

Purchasing your first home can be both exhilarating and intimidating. You may understand the basics for a successful purchase—searching, bargaining, mortgage-underwriting evaluation and closing. Yet before you make it to the final stage of signing off on paperwork, you’ll need to get financing. Many people who are just starting out in homeownership don’t have enough money saved up; consequently any help is appreciated!

Thankfully, numerous loans are available for first-time homebuyers that will bring them one step closer to owning their dream house. Most of these loan options feature relaxed down payment requirements and some even cater specifically to those who have a low income.

What Is a First-Time Homebuyer Loan? 

Owning a home shouldn’t just be reserved for those who have high credit scores, generous incomes, and hefty savings; with the help of first-time homebuyer loans, the dream of owning your own home can become an achievable reality. Not only do these financial products provide assistance to buyers in need, but they also open up access to other homeownership opportunities that may not require borrowers to fit certain criteria. With this kind of loan product at hand, opening up doors you didn’t think possible is now well within reach!

How To Qualify for First-Time Homebuyer Loans 

If you have never owned a home in the past, chances are that you would be considered a first-time homebuyer. It really depends on the program, but generally speaking this definition applies to many individuals. Therefore:

  1. If you are looking to purchase a new property, be sure that it has not been the primary residence of any other individuals in the past three years.
  2. As a single parent, you are the sole proprietor of your former marital residence.
  3. You were a homemaker and shared ownership of goods in your marriage.

FHA Loans 

As one of the most commonly selected options for first-time homebuyers, FHA loans are backed by a government agency that provides lenders with added flexibility to loosen their requirements and offer improved terms to prospective buyers.

How the Loan Works 

Investing in a home has never been easier with FHA loans! Allowing for one- to four-unit properties and requiring just 3.5% of the purchase price as a down payment, this loan makes it simpler than ever to own your dream house. Do note that the maximum loan limits may vary based on where you are shopping – so be sure to check them beforehand!

How To Apply 

Are you in the market for an FHA loan? Look no further! Banks, credit unions, online lenders and mortgage brokers are all known to approve FHA loans – so it’s just a matter of finding one that suits your financial and credit profile. Reach out to any of these trustworthy sources today to get started on your journey towards securing an FHA loan!

It’s important to note that an FHA loan may not be the perfect choice for every type of homebuyer. For those with a good credit score and 10-15% down payment, they may benefit tremendously from going with conventional loans.

FHA Energy Efficient Mortgage 

FHA’s Energy Efficient Mortgage program (EEM) presents an amazing opportunity to first-time homebuyers. You can qualify for a loan that would cover making your new house more efficient and all you need is the qualification required to purchase it! No extra qualifications are necessary, effectively giving you access to funds which weren’t available before – creating a truly unique advantage.

How It Works 

An EEM mortgage operates similarly to your other FHA-insured mortgages. The lender approves and finances the loan, while the FHA insures it in order to safeguard them from any potential defaults. Before closing on the loan, you must have an assessment verifying that all of your improvements are cost effective – indicating that they will lead to savings over time equivalent or greater than their original price tag! Those cost savings dictate how much money can be borrowed for the property in total.

How To Apply 

If you are interested in taking advantage of the benefits offered by an FHA Energy Efficient Mortgage, make sure to reach out to a trusted and approved lender today.

Manufactured Home Programs 

The Federal Housing Administration (FHA) provides incredible financing options for both manufactured and mobile homes. It doesn’t matter if you already own the land or are looking to buy a mobile home in a park, FHA has an answer for your needs! Since these types of dwellings aren’t as common as other housing structures such as condos or traditional houses, it is best to seek out a lender that specializes in this area. Don’t wait any longer – take advantage of this great opportunity today!

USDA Loans 

The USDA’s home loan program allows low- and moderate-income households in rural areas to buy homes without requiring a down payment. This means that first-time buyers have the opportunity to obtain up to 100% financing toward their dream house!

How the Loan Works 

If you’re looking to purchase a home, the USDA loan program may be suitable for you! It doesn’t matter if it’s an attached or detached house, condo, modular or manufactured; as long as the location is eligible. Furthermore, your household income must not exceed 115% of the median and demonstrate that you are able to handle debt payments without relying on private mortgage insurance (PMI). While there aren’t any minimum credit score requirements – proving financial literacy is still necessary in order to qualify.

How To Apply 

If you’re a first-time homebuyer interested in purchasing an eligible property through the USDA, then working with one of their approved lenders is necessary. To make this easier for everyone, the UDSA has created a list of active mortgage lenders searchable by state – so finding the right lender for your needs should be as simple and hassle free as possible!

VA Loans 

If you are a qualified member of the U.S. military – active duty, veteran or an eligible surviving spouse – and looking to purchase a home, take advantage of VA loans backed by the U.S. Department of Veteran Affairs!

How the Loan Works 

VA home loans are a lifetime advantage that you can use again and again, provided by banks and mortgage lenders. Not only do VA mortgages come with 100% financing and lower rates of interest, there’s no need to worry about closing costs or PMI either! Credit providers recognize the VA guarantee for what it is – an assurance of trustworthiness – so you’ll benefit from loan terms like never before. With this incredible offer on your side, why not take advantage today?

How To Apply 

As you contemplate obtaining a VA loan, it is important to note that your lender of choice will need the necessary Certificate of Eligibility (COE) documents. Fortunately, they can be easily procured via the VA’s eBenefits portal or simply through mail. Moreover, some lenders are willing to lend a helping hand in acquiring them for you.

Following the COE, your lender will ask for a VA appraisal of the residence to make sure it meets certain requirements. If approved, you can proceed with closing on the property! Additionally, you may need to pay a one-time funding fee that helps offset costs associated with obtaining this loan since no down payment or mortgage insurance is required. Please note that lenders also charge interest in addition to any other related closing fees.

Alternative Financing Options 

With several financing options available, you can find the best fit for your home purchase. From conventional loans to grants and seller financing, there is something out there that will suit your unique circumstances. You may even be able venture into borrowing from retirement savings or take advantage of state-based first-time homebuyer programs – just make sure to check if early withdrawal penalties apply when taking this route!

The Bottom Line 

Determining which loan program is best for you as a first-time homebuyer can be bewildering, yet it doesn’t have to be! Take into consideration your income, credit score, military status and more. Even though there are numerous choices available across many financial scenarios, not all may apply in your area so do research wisely. To ensure the ideal outcome for yourself – always discuss with a lender or mortgage broker what works best given your particular circumstances and requirements.