Three Types Of Mortgages First-Time Homebuyers Should Know

Homeownership is one of the most significant decisions and financial investments you’ll ever make. The first step a person should take when preparing to purchase a home is evaluating the best type of home loan for them. Choosing the right mortgage loan can affect your entire homeownership experience, so it’s essential to do your research and speak with qualified real estate professionals who can guide you through your process.

According to real estate agents, a common mistake of first-time homebuyers is house hunting without knowing the financial aspects of purchasing a home. There are many different types of mortgages, and understanding them can be quite a challenge. The best lenders can determine not just how much you are preapproved for, but more importantly, what monthly note will fit into your budget. Considering all facets of your budget will allow you to enjoy your home while also enjoying your life! Is travel important to you? Do you have plans to attend grad school or start a family? Considering your priorities and fully working out your budget for the next five years is a great first step to determining how much house you can comfortably afford. 

Your lender will help you decide which loan type best suits your financial goals. Below we have outlined three of the most common mortgage loan types first-time homebuyers should know.

#1. FHA Loans

FHA Loans are government-issued home mortgages insured by the Federal Housing Authority Administration. They are the best type of mortgage for first-time homebuyers and have the most lenient credit score requirements, needing only a credit score of 580 to qualify or a 500 credit score with 10% down. While they offer entry-level access to home buying, they also have a higher interest rate for lower credit scoring individuals. This loan requires a monthly mortgage insurance premium attached to your monthly note. Since FHA loans are designed for low to moderate-income borrowers, they require a lower down payment than other mortgages. 

#2. VA Loans

VA home mortgage loans are another type of government-issued loan made for US service members, veterans, and spouses of deceased veterans. The greatest benefit of a VA loan is they require no down payment since the Department of Veteran Affairs guarantees them. The credit requirement for VA Loans is 580. 

#3. Conventional Loans

First-time homebuyers who have good credit, a steady income, and low debt can qualify for a conventional loan. The great benefits of a traditional loan are that they’re flexible, have lower fixed rates, and offer several options for down payments. They are designed for buyers between 10-20% saved for a down payment. Most conventional loans require a credit score of 620 and a 5% down payment. 

Now that you have some brief insight on mortgage loans, we hope you feel more prepared to begin your homeownership journey. Don’t forget to call a Rêve agent this year to help you with your home buying experience.

Happy Home Buying!

*Written By Deveney Marshall and Michelle LaBanca