Different Home Loans For First-Time Buyers

Buying your first home can be both exciting and scary. 

For those looking to purchase a home in Arkansas, the journey begins with understanding the different types of mortgages for first-time buyers. There are many different home loan options to consider, and with the right guidance, homebuyers can secure a mortgage that meets their needs.

In this article, we’ll go over the different types of home loans first-time buyers should be aware of, so you can determine what the best fit is for you.

At Arkansas Federal Mortgage, our lending experts are well-versed in helping find the best type of mortgage loans for first-time buyers. This includes providing information on what mortgages for first-time buyers are available and how to select the right one. If you’d like personalized support to find the right type of mortgage for you, you can book an appointment at your local Arkansas Federal branch, where a lending specialist can help advise you on your options.

Types of Mortgages for First-Time Buyers  

There are several types of home loans for first-time buyers. Each of these loans varies in its requirements and benefits. What type of mortgage is best for first-time buyers will depend on your unique situation. Outlined below, you will find the different home loan types explained:

FHA Loans For First-Time Home Buyers

FHA loans offer competitive interest rates and are one of the most popular types of mortgages for first-time buyers because of how accessible they are. At Arkansas Federal, buyers with a credit score as low as 580 may qualify for an FHA home loan. 

The minimum down payment for an FHA loan is just 3.5%, making this a great option for buyers needing flexible qualification guidelines with limited savings.  FHA loans are a great option for a simple path to homeownership. 

Rural Home Loans For First-Time Buyers

If you are purchasing in a designated rural area, a USDA Rural Development loan is one of the best types of mortgages for first-time buyers. USDA loans are backed by the U.S. Department of Agriculture and are designed for low to moderate income borrowers in eligible rural areas. Benefits of a USDA Rural Development loan include zero down payment, competitive interest rates, and minimal monthly mortgage insurance. This makes a USDA loan a great option for buyers who can afford a monthly mortgage payment but haven’t been able to save for a large down payment. 

VA Loans

Backed by the Veteran’s Administration, VA loans serve active-duty service personnel, eligible veterans, and surviving spouses of veterans. Benefits of a VA home loan include 100% financing, competitive interest rates, no monthly mortgage insurance, and streamline refinance options, making this an excellent first-time homebuyer program for eligible borrowers. Veterans who have a service-related disability are even exempt from paying the VA Funding Fee. 

Conventional Mortgages For First-Time Home Buyers

Conventional mortgage loans are known as “conforming” loans, which means they conform to the Federal Housing Finance Agency (FHFA) under which Fannie Mae and Freddie Mac purchase mortgages. Conventional loans are great options for first-time buyers with good credit, a low debt-to-income ratio, and the ability to make a down payment.  

For credit scores, lenders typically look for borrowers with a score of 620 or higher to qualify for a conventional loan. Downpayment requirements can vary by loan type, but many borrowers are surprised to learn that some home loans require far less up front than expected. 

First-time homebuyers only have to make a 3% downpayment on conventional loans!  Similar to FHA and USDA loans, conventional loans also have a monthly private mortgage insurance (PMI), but as you build equity in your home, conventional loans give the option to remove PMI once your equity reaches a certain point, typically once you’ve reached at least 20% equity in your home.

Arkansas Federal’s 100% Mortgage

At Arkansas Federal, we offer our own unique in-house mortgage option perfect for first-time homebuyers:  Our Zero Down Mortgage.  This is a great option for first-time homebuyers with good credit and limited savings, letting you put more of your money toward closing costs, home improvements, or an emergency fund. Even better news – our Zero Down Mortgage is not just limited to first-time homebuyers.  You can even use this program again on your next home purchase as long as you do not own any other property. 

Get Your First Home Loan With Arkansas Federal 

Understanding what type of home loan for first-time buyers is best for you can be overwhelming and confusing. At Arkansas Federal Credit Union, our team of mortgage specialists is experienced in helping first-time buyers in Arkansas find the best mortgage for them.
To learn more about the different types of home loans for first-time buyers and what loan may be best for you, reach out to your local Arkansas Federal branch and book an appointment to speak with a mortgage specialist.