First-time Homebuyers: You’re Closer to a Down Payment Than You Think

For many first-time buyers, saving for a down payment is the most difficult step in the home-buying process. However, it’s a common misconception that you always need 20 percent down to buy a home.

Here’s the lowdown on the most popular low-down alternative payment options:

FHA Loan – Traditionally the mortgage of choice for first-time buyers, the Federal Housing Administration (FHA) offers government-insured loans with as little as 3.5 percent down. The most popular FHA loan option, the 203(b), is widely available from lenders across the country. You may qualify with a credit score of just 500, although there may be limitations on some condo purchases.

Home Possible from Freddie Mac – This program allows you to put between 3 and 5 percent down, as long as you intend to use the home as your primary residence, and don’t currently own or share ownership of another house. You’ll also need to complete a required homeownership education program online.

Conventional 97 from Fannie Mae – Just 3 percent down is enough to help you qualify for a Conventional 97, as long as you’re applying for a fixed-rate mortgage on a single-family home that’s less than $417,000. You’ll also need to participate in a homeownership education program, and at least one of the purchasers applying for the loan must be a first-time buyer.

HomeReady from Fannie Mae – Another option that requires as little as 3 percent down, HomeReady can also offer below-market interest rates. Additionally, this program allows non-occupant borrowers to apply. For example, parents can secure this type of loan for a young adult who’s just starting to establish credit.

To discuss the best option for you and to get a head start on your home search, contact your local RE/MAX agent today!

5 comments

  • Lorraine says:

    What about Cmhc? Is it still available or has fha replaced it?

  • Millie Hue says:

    It really helped when you said that we can actually get a loan even if our credit score is just 500. This is great news since my husband and I are really itching to get our own house and stop renting. We might not have that high score because we had a bad record three years ago when we were unable to pay for the car which was pulled out. But this information gave us hope. So thanks a lot!

  • Sarah Smith says:

    My cousin has been living in apartments since he was first on his own 10 years ago and is now looking to buy a house. He will really appreciate your information that first time home buyers can qualify for a loan with a lower credit score and only putting 3.5% down. I’ll suggest that he look into a real estate agent who can help him figure out what house would be best for him and what he can afford with the loan.

  • Sam Li says:

    I appreciate your suggestion regarding FHA loans and how they can be a viable option for people with small credit scores. Buying a home is a huge thing when it comes to finances, so it’s best to find a home that doesn’t look at credit. If I were to purchase a home, I would make sure to work with a reputable real estate company that knows my needs.

  • Tammy R Wolford says:

    I’m looking to buy a home I was going to see if I can get a loan

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