First Time Home Buyer Mortgage Options

This article explains the first time home buyer mortgage options here. First, let’s explain what a first time home buyer loan is.  The purpose of this loan product is to help people buy their first home.  As a result, the lender overlooks credit issues and is more lenient on the debt versus income requirement, and the percentage of down payment requirement on a home.

No Money Down Loan Programs:

There are only two true no money down loan programs. They are the VA home mortgage loan and the USDA Rural housing loan.  Both of these loan programs are backed by the US Government.  All other no money down loan programs have a catch.  So please read on.  This is very important!

Other First Time Home Buyer Mortgage Down Payment Assistance Programs:

While these other down payment assistance programs appear attractive at first, they come with several strings and requirements. Make sure you read the fine print and know the exact terms of your free down payment.  Although, these down payment agencies will help with your down payment, closing costs, & may allow you to buy a home that you might not be able to afford; I can assure you there is a catch.  What’s the catch?  For starters the interest rate is typically higher.  Often, one has to pay a fee just to obtain the interest rate.  This is what we call a loan discount.  The interest rate available does not start at the par pricing.  That means you have to pay a fee for the interest rate.  There are additional fees associated with the programs such as fees payable to the agency for offering this program.  Oftentimes, borrowers don’t care because the seller pays this cost for them in exchange for the price of the home being higher.  Why would you want to pay a higher price for the home just to obtain this program?  If you do this, you raise the payment amount on your mortgage.  In most cases, the first time home buyer doesn’t even realize their agent has negotiated a higher sales price of the home just so they can qualify for this down payment assistance program.  Some real estate agents just automatically do this without really explaining to their clients how the whole process works.  The rule of thumb is, “there is no such thing as anything being free in America.” There is always a catch.

Don’t Care About A Higher Rate & Still Want Information on Down Payment Assistance For a First Time Home Buyer Mortgage?

Currently, we offer a 1.5% down FHA loan program for first time hombuyers or anyone who works as a first responder such as paramedics, firefighters, call center operator for 911, etc.  To qualify one needs a middle fico score 620 or higher.  You need to have two years of continous employment.  The FHA loan  requires a full 3.5% down payment.  You need to put 1.5% down on your new home.  The remaining 2% down payment will be a gift from the lender in exchange for a higher interest rate.  Yes, the interest rate will be higher.  That is the catch.  It does not matter if you have a 640 fico score or a 740 higher score.  Your interest rate is  higher.  Don’t want a higher interest rate?  Then, you will need to come up with the funds for your own down payment.

How Do I Obtain The Best Loan Program:

Typically, if a borrower has decent credit, has been on the job for two years, and has down payment money, they can qualify on their own. This option allows you to obtain the best mortgage rate and the lowest closing costs.

What Are Settlement Costs?

They are made up of closing costs and estimated items. Estimated items are thing such as your home owners insurance, real estate taxes, and the days per interest fee on the home.  These are variable expenses that can change on your mortgage.  For instance, if you buy a home and your annual tax bill is $1200 for the year, there is no guarantee that next year your tax bill amount due will still be $1200. The days per interest fee is based on the number of days starting from the day after your loan closes through the first day of the month. The good news though is this is a one time fee that is paid at closing only. Closing costs items are your appraisal, credit report fee, title fees, home inspection fee, home warranty, bank fees, and any other fee.  These fees are all set ahead of time so the fee amount cannot change.  When it comes time for closing, your estimated fees and your closing costs fees get added up together to form your settlement fees which are due at closing.

Mortgage Calculator:

You wont’ find a mortgage calculator here because we prefer one on one communciation.  You see it’s not just about how much of a total mortgage payment you can afford.  You need to make sure you have enough money to cover any unexpected event that may show up such as medical, dental, car expenses or home repairs.  All of these unexpected items will be addressed when we address the prequal process.  The mortgage calculator is a good start so you can determine an estimated purchase price.

AZ First Time Home Buyer


For more information, please call our office directly and talk to a licensed loan officer at 602-358-8717.

Article 1:  First Time Home Buyer Mortgage