The government likes to reward first-time homebuyers for their investment by providing a variety of programs and grants that can make that first home more affordable. Here are a few examples of some of the financing options for first-time homebuyers in Alpine, TX that can help you get into your very first home without having to make that 20 percent down payment.
Federal Housing Administration (FHA) loans usually have smaller down payments and lower credit score requirements than most conventional loans. If you’re a first-time homebuyer, you can purchase a home with a credit score of at least 580 even if you put as little as 3.5 percent down, or a score of at least 500 if you put at least 10 percent down.
Keep in mind that you’ll still need to pay for private mortgage insurance (PMI) to secure the loans if you put down less than 20 percent, and depending on the circumstances, overall borrowing costs could end up being higher.
Loans backed by the U.S. Department of Veterans Affairs (VA) allow for no down payment, so long as you are active military personnel or a veteran.
VA loans are ideal for people who qualify because they come with lower interest rates than most loans, and do not require you to put down a down payment. However, you will need to pay a funding fee, which can be included in monthly loan expenses. In some cases, certain servicemembers may be exempt from that funding fee. There’s also no minimum credit score and no requirement that you pay PMI.
The U.S. Department of Agriculture (USDA) guarantees some loans for rural homes, and borrowers for these loans can get 100 percent financing. The home has to be purchased in a USDA-eligible area, but it does not have to be an agricultural property.
Fannie Mae or Freddie Mac conventional loans
Conventional loans backed by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac only require a three percent down payment. Homebuyers who wish to qualify for such a loan will need at least a 620 credit score, as well as relatively few blemishes on their credit history and finances. You might still be able to qualify if you have up to a 50 percent debt-to-income ratio, but you will still need to pay for PMI if you put down less than 20 percent.
If you’re purchasing a fixer-upper, there are some benefits available to you as a first-time homebuyer. There will be some extra money required to take on the reservations, so the FHA offers Section 203(k) loans. The loan determines the home’s value after potential improvements, and allows you to borrow funds to pay for any home improvement projects you need to take on, rolling all of those costs into a single loan. Note that such improvements must cost at least $5,000, and you’ll need to make at least a 3.5 percent down payment.
For more information about how to finance your first home in Alpine, TX, contact Carpenter Real Estate today.