If you’re a first-time homebuyer, it can be easy to feel overwhelmed by the process.
With home prices and mortgage rates on the rise, it has become increasingly difficult for first-time homebuyers to enter the market. Fortunately, first-time homebuyers — typically defined by lenders as a person who has not owned a home in the last three years — may qualify for unique programs that can help them attain home ownership. Benefits typically include low down payments or closing cost assistance.
Jared Cook, regional sales manager for Zions Bank Home Finance, provides an overview of first-time home buyer programs.
#1: Zions Bank Affordable Home Mortgage loans
Compared to traditional mortgages, the Zions Bank Affordable Home Mortgage Loan has highly competitive features to help ease the financial burden for borrowers.
“First-time homebuyers who leverage this program often benefit from closing cost assistance, a competitive mortgage interest rate and low down payment requirements,” says Cook. “For example, for qualified borrowers, Zions Bank’s Affordable Home Mortgage Loan only requires a 3% down payment and offers lender paid mortgage insurance.”
#2: Federal Housing Administration (FHA) loans
The Federal Housing Administration provides FHA loans to help a wide variety of home buyers qualify for a mortgage. They offer numerous down payment options and repayment terms to help prospective borrowers attain the American dream of home ownership.
“An FHA loan could allow you to purchase a home with only 3.5% down, with possibly a lower mortgage rate compared to conventional loans,” says Cook. “The bottom line: The FHA loan could give you more buying power for your first home.”
#3: Fannie Mae and Freddie Mac resources
The Fannie Mae HomeReady Mortgage and Freddie Mac Home Possible Mortgage are designed to help mortgage lenders serve credit-worthy borrowers with low incomes. Qualified first-time home buyers typically have a credit score of 620 or higher, which opens the door to valuable benefits.
“The HomeReady program could allow borrowers to make a down payment as low as 3%, while leveraging gifts and grants to cover the down payment and closing costs,” says Cook. “Additionally, mortgage insurance is often cancellable when the borrower’s equity reaches 20%.”
Fannie Mae and Freddie Mac offer a $2,500 credit to help with down payment and other costs at closing. Homebuyers earning 50% of area median income are eligible for the assistance, providing certain requirements are met.
#4: Local housing organization programs
In Idaho, the Idaho Housing and Finance Association provides programs that help make first-time homeownership affordable for qualified borrowers. The IHFA works with many Idaho mortgage lenders, including Zions Bank, to help administer residential and multifamily mortgages.
“Idaho Housing and Finance could allow a borrower to make a low down payment and obtain funds to help offset closing costs,” says Cook. “One popular option is obtaining 102% financing, which covers a down payment and helps with your closing costs. However, keep in mind that you’re typically required to put down 0.5% of your own funds into the loan.”
#5: VA Home Loans
These first-time homebuyer loans are designated for military service members, select military spouses and veterans. Qualified borrowers may purchase a home with no down payment required and they aren’t required to carry mortgage insurance.
“These loans receive special benefits because they’re backed by the U.S. Department of Veteran Affairs,” explains Cook. “Because this lowers risk for financial institutions, VA loans often have more competitive mortgage rates compared to conventional loans.”
Choose a mortgage lender that can help you leverage the right homebuyer programs
“Despite the challenges in the housing market, there are many first-time homebuyer programs that can help you close on the home of your dreams,” says Cook. “To make the right decision, you’ll benefit from working with a knowledgeable mortgage loan officer to compare your options.”
Zions Bank offers programs to help first-time homebuyers conquer affordability challenges, including low down payment requirements, competitive interest rates and down payment assistance to those who qualify. Contact a Zions Bank mortgage loan officer to learn more.