Buying a home can be scary, especially when doing so for the first time. In addition to finding the right neighborhood and home, working with a real estate agent, and signing all the paperwork, you’ll need to take out a loan. Procuring a loan can be a challenge in itself; it can be very difficult for those buying a home for the first time to get one. Fortunately, there are many lenders and government programs aimed at helping first-time home buyers to get a home loan.
What is It?
The basic idea of a home loan for
first-time buyers is that it allows people to get a loan that they may not otherwise qualify for. If you have low credit or no credit, you may think you have no chance of getting a loan to buy a home. However, first-time buyer home loans make it easier to get one. Aside from that, home loans for first-time buyers often provide financial assistance to help you pay off the loan.
For instance, your lender may allow you to pay a relatively low down payment.
Some loans may even let you avoid having to pay any down payment. You can also receive subsidized interest costs on the loan. Additional benefits of first-time buyer home loans can include forgiveness for other loans, limited lender fees, and deferred payments.
TIP: Check out the Department of Housing and Urban Development’s website to learn how to find loans available to first-time home buyers.
How Do You Qualify?
The main goal of these programs is to help those with lower incomes to fulfill their dreams and get their own home. So the main requirement to qualify for a first-time buyer home loan is to be within a certain income bracket. If your income is above a certain level, you probably won’t be able to take advantage of a first-time home buyer program.
Even if your income does enable you to qualify for such a loan, there are some other restrictions in place. For instance, lenders will often have limits on the price of the home you want to buy. Since it wouldn’t be worthwhile for them to provide you with a loan to buy an expensive home, the value of your desired home will have to be under a certain threshold. Therefore, the first-time buyer home loan isn’t idea for everyone.
Once you do find a suitable home, there will still be some restrictions on your ability to get a loan. For one, the home should be your main residence. It’s not the best idea to apply for a first-time buyer home loan if you plan on renting it out. Secondly, the home must be safe to live in and not have any serious problems.
The Downside
There are some obvious benefits to these first-time home buyer loans, mainly that people who couldn’t otherwise afford one can get their own homes. However, there are some disadvantages as well. Consider these before trying to attain a loan.
- As mentioned above, by taking a first-time buyer loan, you might not be able to get your ideal home. Since there are restrictions on the value of the home you can buy, you may have to settle for less.
- If you do get a home with this loan, you could end up having to pay taxes for the benefits you receive.
- Should you decide to move out of the home you purchased with the loan too soon, you may lose some of the benefits of the program.
- If the value of your home goes up significantly, you may have to share some of that value with your lender.
Though it may seem tempting to try to get one of these first-time buyer home loans, they definitely aren’t for everyone. But, if you have been unsuccessful in trying to get a mortgage, then these first-time buyer home loans are a valid way to achieve the dream of owning your own home.