February 25, 2021 at 9:33am | BBHST Admin
By: Kyle Spearin

When you are looking for your first home, the entire process can feel overwhelming. Most people that are new to homes are always worried about the loan process. With all of the horror stories on the internet, it is easy to see why—but there are plenty of great home options, especially for first-time buyers. In fact, this group in particular has plenty of helpful loan options to choose from. In this post, we will discuss the five best loan options for first-time buyers!

FHA Loans

For new home buyers that are not completely confident in their financial situation, FHA loans can be a very approachable loan type. While every loan is subject to approval, FHA loans have a reputation for being fairly easy to acquire in most cases. With an FHA loan, the government agrees to back the purchase. This means that the loan itself is actually a fairly low risk for the lender, so they are much easier to qualify for.

With FHA loans, you can get some really great benefits. In fact, this is even more true if you are able to put down a fair amount of money for a down payment. Unfortunately, that can also be a problem for some home buyers. While FHA loans only require a 3.5% down payment, they also offer a lot of leniency for those with a poor credit history. An FHA loan can help someone with a 550 credit score or less get approved for a home as long as a higher down payment is made.

Unfortunately, since FHA loans are available to people that the lender might consider a risk, it comes with additional requirements. One requirement is mortgage insurance. Mortgage insurance will add more to your overall cost and adds extra to your monthly payments, which can cause some problems for home buyers looking to spend smaller amounts.

Conventional 97

Conventional 97 loans are a more approachable loan option for some, particularly those that want a lower down payment. For some people, the down payment is a fairly big hurdle depending on the cost of the home itself. With a Conventional 97 loan, homeowners only need to put down 3% of their overall home cost down. This can help you save significantly on upfront costs.

Similar to FHA loans, Conventional 97 loans require users to have mortgage insurance. While this is a drawback, it is also a little more forgiving with this kind of loan. Unlike FHA loans, Conventional 97 loans allow you to skip on the large upfront insurance costs. More importantly, they enable you to cancel the insurance later when there is enough equity in the house. Their 620 credit score requirement is also beneficial for a lot of people!

VA Loans

Active-duty military members, veterans, and their spouses have access to an incredible benefit with VA loans. For new homeowners, they have a lot of really great savings opportunities and are considered to be very approachable and accepting of applicants. Though VA loans vary from one person to the next, they are supportive of lower credit scores and offer working solutions.

In addition to offering a high approval rate, VA loans also help new homeowners to save on additional costs. With VA loans, you can benefit from lower interest rates, lower closing costs, and a forgiving arrangement with mortgage insurance. It is a loan type that really allows you to get all of the best deals when you close on a home.

The real benefit to VA loans come with the down payment. With VA loans, a down payment isn’t required at all. That means as long as you qualify, you can essentially move in with no major upfront costs. This distinction is why anyone with a military background or spouse should absolutely go through the VA for one of their loans. It really is a better deal than you will get anywhere else.


USDA loans are loans that are only available in certain areas. These loans are essentially a government project and are designed to encourage living in less populated areas around the United States. Since the government actively wants people to move to these areas, they are more than happy to sweeten the deal. In a qualifying area, USDA loans can be the best option.

With A USDA loan, the loan is backed by the government. So, like FHA loans, it comes with a wide range of perks. First, these loans are friendly to people with poor credit situations. In addition to this, they are able to offer lower interest rates, affordable mortgage insurance, and they also don’t require a down payment.

Fannie Mae HomeReady and Freddie Mac Home Possible Loans

These standards loans are meant to be approachable for home buyers looking to save on upfront costs. With a 3% down payment and optional mortgage insurance that can be canceled at a later time, it is easy to see why. While these loans are only available to those with a 620 credit score or higher, they can offer some pretty great perks for those who qualify.

With a Home Possible loan, young or supported homeowners have a significant benefit. These loans allow a third-party to gift the down payment of the home. Anyone who is lucky enough to have someone who would like to make the payment can benefit from this perk, making it appeal to newlyweds and other younger groups. Since it is often used by new and younger owners, it does also require homeowners to take an education course on buying a home in order for them to qualify.

Final Thoughts

Looking for a new home can be incredibly exciting, so don’t get bogged down worrying about what your loan will look like. In reality, the real estate world is very approachable and forgiving for first-time home buyers. Fortunately, this means that you have the chance to get a pretty great loan so you can start moving into your dream home sooner rather than later!


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