If you are looking to buy your first home in Champaign County or plan to do so, you may be wondering what programs there are to help you afford this endeavor. The good news is that there are a number of ways that new home buyers can get help to get the right loan for their first home.
Here are a few options provided by the federal government to consider.
FHA Loans
FHA, short for the Federal Housing Administration, offers loans with a minimal down payment requirement of 3.5%. These loans are particularly beneficial for individuals who are purchasing a home for the first time. Based on the latest federal data, it reveals that nearly 73% of FHA borrowers opted to put down less than 10% when obtaining loans in the autumn of 2021.
However, if your credit score is below 580, an FHA loan mandates a minimum down payment of 10%. If your credit score is in the 500s, you have the potential to be eligible for one of these loans, although typically borrowers with significantly higher scores are approved. On average, FHA borrowers from January to November 2021 had credit scores of 678.
When obtaining an FHA loan, it is important to bear in mind that mortgage insurance will be mandatory.
Fannie Mae and Freddie Mac collaborate with nearby lenders to provide conventional mortgage loan options. A selection of these loans have minimal requirements for down payments.
An illustration of this is the HomeReady mortgage offered by Fannie Mae, designed specifically for individuals with low incomes. To be eligible, borrowers must have a minimum credit score of 620, although having a score of 680 or above is preferable. With a HomeReady loan, you only need to provide a down payment of 3%, and once you have accumulated 20% equity in your home, you may qualify to eliminate mortgage insurance. However, this is not the case with an FHA loan.
The Home Possible loan, provided by Freddie Mac, offers a great opportunity for individuals looking to buy their first home, those wanting to upgrade their current property, and retirees. With a minimum down payment requirement of just 3%, this program aims to make homeownership more accessible. Additionally, you have the flexibility to use funds from gifts, loans, or grants to cover your down payment and closing costs.
USDA Home Loans
The U.S. Department of Agriculture provides a special program aimed at assisting prospective home buyers, and it’s not limited to those residing on farms. While the program primarily focuses on buyers in rural regions, it frequently extends its benefits to suburban areas as well. Through this program, borrowers can obtain 100% financing since the USDA offers a guarantee to lenders for the mortgage.
Income limitations vary by region and are also influenced by the size of your household.
VA Home Loans
The home loan program offered by the Department of Veterans Affairs aims to assist military veterans, service members, and certain surviving spouses in buying homes. Unlike other loan programs, VA loans do not necessitate a down payment and remarkably, they also waive the requirement for mortgage insurance.
If you are a qualified veteran, this program allows you to have a greater debt-to-income ratio and be eligible for a larger mortgage compared to most other loan programs available. The VA does not establish any income prerequisites or credit boundaries, but each lender will set their own.
If you are a first-time home buyer, there are options to help you realize the dream of owning a home in Champaign County. Rose Price is happy to help you analyze your options, so make sure to contact her today!
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