Loan Options for First-Time Homebuyers. First-time homeowners in the market for their first-ever home will need to weigh all their loan options. The Orlando real estate has several homes on sale, but the home you may have come to love may be a little out of your range.
You will need to acquire a loan with a low down payment or one that focuses less on credit score and income. The question remains, “what are the popular loan options for first-time homebuyers for 2020?” Let’s find out.
1. Federal Housing Administration (FHA) Loans
Although FHA loans are guaranteed loans, it does not guarantee that you will qualify for it. If you do, the loan will reimburse the lender in the event you default on it. Since the FHA loan protects the interests of lenders, you are more likely to qualify for it.
Benefits
- Minimum down payment – 3.5% (If you get a $200,000 home loan, you will pay only $7,000)
- Low-interest rates
- Lowest credit score criteria
Your credit score should be at least 580 to be eligible for the 3.5% down payment. If you plan to put a larger down payment (10%), you can qualify for this loan with a credit score of 500. Low-income earners can also qualify for this loan.
2. The Conventional 97 Loan
The Conventional 97 loan is ideal for first-time homeowners wanting a low down payment plan. Make a 3% down payment to qualify for this loan. You will need to obtain annual mortgage insurance, but you can cancel it once your home’s equity has increased.
Benefits
- 3% down payment
- Can cancel mortgage insurance
- No need to pay an insurance fee upfront
- Need a minimum credit score of at least 620
The conventional loan is not for you if you have a poor credit score. If your credit score is not 620, you should opt for an FHA loan.
3. Fannie Mae HomeReady and Freddie Mac Home Possible Loans
Both types of loan options require you to make a down payment of at least 3%. You also won’t have to pay a lot of money upfront.
Benefits
- 3% down payment
- Can cancel mortgage insurance
- Can qualify with roommate income
- On Home Possible, you can use gift funds for 100% of the down payment
- Accepts credit score that starts at 620
First-time homebuyers will need to enroll in a homebuyer education course. You can cancel the mortgage insurance at any time. You will need a higher credit score to become eligible for this, and if you don’t have it, an FHA loan may be the best option for you.
4. US Department of Agriculture (USDA) Loans
If you want to buy a home in a rural area of the state, a Winter Garden realtor can help you find one, and you will be eligible for the USDA loan. The US Department of Agriculture backs the USDA loans, and, in return, it gives you big benefits.
Benefits
- 0% down payment
- Low-interest rates
- Affordable mortgage insurance
- Created for low-income earners
The only downside is that this loan is only applicable if you decide to buy a home in a rural part of the state. The reason for this is that the loan aims to fill the less populated areas of the country.
Visit Megan Dowdy Realty to consult with an experienced Orlando realtor to show you to your dream home. For more details, call on 407-509-9279.