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Homeownership is a big step and finding the best mortgage lenders for first-time home buyers is essential. Fortunately, you have more options than ever. Looking for a lender? Here are the top tips for finding the best lenders for first-time home buyers.
Assess Your Financial Situation
First, you should get a free copy of your credit report from AnnualCreditReport.com.
Because mortgage lenders look for good credit history, they want to see proof that you’re paying your obligations on time and not maxing out your available credit.
Next, review your credit history for incorrect information or fraudulent activity. According to a Federal Trade Commission study, 25% of consumers find errors on their credit report that could lower their credit score. Take time to dispute misinformation with the credit reporting agencies before applying for a loan.
Finally, review past statements and financial accounts to determine where your money goes. Then, if possible, reduce some expenses and put that money towards bills like credit cards or student loans to lower your debt balances and potentially increase your credit score.
Check Out First-Time Home Buyer Programs
Your state, county, or city may offer programs to help first-time home buyers. Shop around local lenders, too — sometimes lenders partner with state organizations and offer discounted rates, educational resources, and down payment assistance for first-time home buyers.
Some first time home buyer programs include:
- Public servant loans or grants
- Veterans loans
- Home buyers with student loans
- Seniors aged 62 and up
Keep in mind that you can qualify for more than one program.
Research A Government-Backed Home Loan
Ask your lender about federal government first-time home buyer programs, like:
- Department of Veterans Affairs (VA) – VA loans can help active military, veterans, and their families.
- Department of Agriculture (USDA) – Ideal for homes in rural areas.
- Federal Housing Administration – Great for low down payment requirements.
Borrowers typically have an easier time qualifying for government-backed loan programs — they can have lower income, down payment, and credit requirement thresholds.
For example, FHA loan requirements can include a down payment of just 3.5% instead of the 20% down payment required by conventional mortgages.
VA and USDA loans may be able to offer you a $0 down payment. So, if you are an Air Force veteran first-time home buyer in Colorado, you may qualify for a VA and an FHA loan.
However, government-back loans have limits. Government programs can have a cap on how much you can borrow, though it depends on your state.
Explore Private Programs
Don’t discount your personal network — it could offer extra help. For example, some employers, non-profit credit unions, alumni groups, or large retailers like Costo have first-time home buyer programs. They may connect you with favorable rates, lower fees, or easier qualification requirements.
Carefully Consider Interest Rates and Other Costs
Interest rates are the cost of borrowing money. It’s important to compare annual percentage rates (APRs) when choosing a lender as a first-time home buyer — the higher your rate, the more you pay. However, there is more to a loan than interest.
Check the terms of loan qualification, title fees, loan origination fees, and appraisal fees. They can impact how much you pay in closing costs when buying a house. Take your time shopping around so you have a clear picture of the loan's terms. Then, find the best program that fits your budget and needs.
Get Pre-Approval Before House Hunting
When considering lenders, compare pre-approval benefits. For example, sellers typically see you as a serious buyer if you are pre-approved for a home loan. Pre-approval also gives you an idea of how much mortgage you can afford and the interest rate you might qualify for.
The pre-approval process may be as straightforward as applying online and providing digital documentation (like copies of pay stubs). But the steps may vary among lenders.
If inconsistent income or a lower credit score creates obstacles, ask lenders if they can work with you. For example, the lender may be willing to consider rent payment history if you don't have much credit history.
Comparison Shop Conventional Loans
Don't stress if you aren’t eligible for a government-backed loan or first-time home buyer program. You have virtually limitless options for a conventional loan. Just make sure you understand how much down payment you might need, the loan APR, application fees, closing cost, insurance expenses, and other loan terms. These things affect your out-of-pocket expenses greatly. Ultimately, you’ll want to develop a relationship with your lender.
You should feel welcome to ask questions about the process, saving money, and completing a successful purchase.
Final Thoughts on First-Time Home Buyer Lenders
First-time home buyers have many options to find competitive rates and home loan programs.
But remember that the lender you choose can impact the property you buy — a lender that moves slowly can cost you your dream house. So, shop around before choosing the best home loan lender for a first time buyer and make sure you’re comfortable with your decision.
