Real estate is an excellent store of wealth. Housing is typically scarce, so owning an appreciating asset like a primary residence is a surefire way to increase your net worth over time. It’s a fruitful way to spend a windfall, especially when you use a portion of it to negotiate a favorable mortgage deal and prudently invest the rest of your inheritance to increase your net worth further and preserve your wealth.
If you haven’t owned a house before, you’re in luck — many lenders offer affordable mortgages for first-time homebuyers. Discover how to compare these loan programs and your best options to minimize your costs and build equity more quickly.
Factors to Consider When Evaluating Affordable Mortgage Options for First-Time Buyers
Consider these factors when comparing home loans for first-timers:
• Mortgage type: Determine whether a loan is government-backed or not to gauge how lax its eligibility criteria, property restrictions and loanable amount limits are.
• Annual percentage rate: Pay attention to this percentage, as it indicates the yearly cost of borrowing cash after taking the interest and all associated fees into account.
• Term length: Find out the least and most months you can repay a loan to enjoy flexibility in lowering your monthly payments or saving on interest.
• Minimum credit score: Check whether your credit is good enough to qualify for your prospective mortgage.
• Debt-to-income (DTI) ratio: Note how much of your gross monthly income goes toward paying your monthly debts to know if you have enough cash to cover your housing payment.
• Loan-to-value ratio: See which percentage of your desired property’s appraised value you can borrow to understand how small or large your down payment should be.
• Grants: Explore how first-time homebuyer loans financially assist in paying the down payment and/or closing costs to minimize out-of-pocket expenses.
3 Most Affordable Mortgage Options for First-Time Homebuyers
These three first-time homebuyer loans are advantageous for newly minted inheritors who want to gain a foothold in the housing market to maximize their newfound wealth.
1. First-Time Homebuyer Program by PSECU
This loan program from PSECU is perfect for any borrower who hasn’t owned a house in the last three years. It has no income requirement, so you don’t have to be a low-wage earner to qualify.
The First-Time Homebuyer Program lets you finance up to 100% of your purchase, so paying a large down payment is entirely optional. The best part is that you don’t have to worry about private mortgage insurance (PMI) — an extra monthly expense designed to insure your lender if you default — without putting 20% down.
Moreover, this nonrequirement doesn’t force you to touch a dime of your inheritance, allowing you to meet its cash reserve requirement easily. PSECU only wants to see 1% of your total loan amount in your savings account when you apply. Judging by the loan’s maximum loanable amount of $806,500, you just need to deposit and season $8,065 at the bank.
If you plan to take out this mortgage with another person, this full-service, digital-first credit union requires one of you to complete an approved homebuyer education course to ensure adequate financial literacy and mortgage repayment management.
PSECU charges low closing costs. It also lets the property seller cover up to 3% of expenses at closing, providing you with another option to save and a bargaining chip when negotiating with highly motivated sellers.
This mortgage requires a minimum credit score of 680. If you have fair or poor credit, PSECU will help you explore other home loans you may qualify for.
2. ONE+ by Rocket Mortgage®
ONE+ is one of Rocket Mortgage's most affordable mortgage options for everyone, especially for first-timers wanting to buy a single-family home as a primary residence.
This loan program only requires you to put 1% down and entitles you to an additional 2% down payment assistance from the lender, raising the total to 3%.
Although owning 3% of the house when the seller hands over the keys to you isn’t enough to avoid PMI, it’s still a buffer against property depreciation and can prevent your loan from sinking underwater. If the market soured and you wanted to list the house, positive equity helps keep you from selling at a loss.
The 1% down payment is just the minimum. Rocket Mortgage will still cover 2% of your down payment if you pay up to 2.99% up front.
This retail mortgage giant only needs you to have fair credit. If your DTI ratio is less than 50%, your chances of getting approved remain.
This conventional mortgage has an income cap. You should make below a certain percentage of the Area Median Income (AMI) where you intend to buy a house. Rocket Mortgage’s lookup tool or home loan expert can verify your qualification.
3. 3-2-1 Home Plus by Guild Mortgage
3-2-1 Home Plus from Guild Mortgage is best for budget-conscious first-time homebuyers. This conventional loan for low- and moderate-income earners with at least fair credit helps cover $1,250 to $2,500 of the closing costs.
This financial assistance depends on the AMI and other eligibility requirements. Buying a house in a less expensive location lowers the credit, but it lets you borrow less and helps save more cash overall.
In addition to the closing cost financial assistance, this first-time-homebuyer-exclusive loan program entitles you to a $2,000 gift card to The Home Depot®.
Make the most of this feature by putting in an offer for a property needing some work. Cosmetically defective homes fetch lower prices on the market, minimizing your expense and letting you customize it your way.
This loan program is suitable for single-family primary residences, condo units and manufactured homes. More variety means higher chances of finding a property you can afford.
Guild Mortgage only requires a 3% down payment. Undergoing prepurchase counseling is a must-do, but it can prepare you for this big-ticket purchase accordingly.
Comparing These Affordable Mortgage Options for First-Time Homebuyers
Here’s a quick feature breakdown of these first-time homebuyer loans.
|
Lender |
Loan Name |
Notable Features |
Term Options |
|
PSECU |
First-Time Homebuyer Program |
Fixed-rate and adjustable-rate options No minimum down payment No PMI No income cap Up to 3% seller assistance 680 minimum credit score |
10-30 years |
|
Rocket Mortgage |
ONE+ |
1% down payment Fixed rate 2% down payment assistance 621 minimum credit score 49% maximum DTI ratio |
30 years |
|
Guild Mortgage |
3-2-1 Home Plus |
3% down payment 620 minimum credit score $1,250-$2,500 closing cost assistance $2,000 The Home Depot gift card |
Unspecified |
Get Preapproved for the Mortgage Options Most First-Time Homebuyers Can Afford
Take out a mortgage you can afford to finally call yourself a homeowner while stretching your inheritance as you turn it into life-changing, generational wealth someday. Reach out to PSECU, Rocket Mortgage and Guild Mortgage to apply.
