First Time Home Loans
First time home loans are specially designed to get buyers into a house without the capital and credit scores common with those who have already purchased and lived in a home. Because most first time home buyers are young and have lower incomes, it is often difficult for them to get approved for traditional home loans. That's why typical first time home loans offer incentives to get buyers in the door, even though restrictions and higher interest rates often accompany these perks.
The Benefits of a First Time Home Loan:
The process of getting a loan and buying a house can be very intimidating,
especially for first time buyers. In order to make everything run easier
and to provide a better outcome, first time home loans clear some of the
necessary hurdles. Although programs vary, they often include:
Low or no down payment
Government assistance
Deferred payments
Subsidized interest costs
Oftentimes, these advantages are offered through programs such as the Federal Housing Administration (FHA) or with piggyback loans.
Federal Housing Administration:
The FHA, a government program, offers up to 97 percent of the total house
cost, meaning that first time home buyers only have to come up with a small
down payment. In the event of a default on payment, the government covers
the losses; therefore, lenders are more likely to feel comfortable giving
funds. In exchange, buyers pay a small monthly fee to the FHA.
Piggyback Loans:
Piggyback loans offer first time home buyers a similar scenario in which
they do not have to come up with a large down payment. They do this by
spreading the loan through several lenders. A typical piggyback first time
home loan might be an 80-20, in which one lender provides 80 percent of the
funds, while another provides 20 percent.
First Time Home Loan Restrictions:
Not everyone can qualify for a first time home loan. Because they are
specially designed for people with certain financial restrictions, there
are income caps as well as constraints for those who have owned a home
before.
In addition, there are typically limits on the amount of loan money available. Individuals seeking more expensive properties might find that they do not qualify for some of the first time home loans. These loans can also not be used for investment properties and often have to pass a government inspection regarding the quality and safety of the home.
First time home loans are not for everyone, but they can provide a valuable service to families and individuals seeking to get themselves into the wonderful world of home ownership.
