When you are buying a home for the first time, finding your best mortgage option can seem like a daunting task. How can you be sure that you are taking advantage of the best first time home buyer program? Knowing the basic loan options for first time home buyers will allow you to make sure that you are exploring all avenues with your mortgage lender and making an informed decision.

After you have looked into your loan options, research mortgage lenders. Your lender will be able to offer you many of the below first time home buyer programs, and they will walk you through the ones that you qualify for in more detail when the time comes.

First Time Home Buyer Programs:

1.Conventional Home Loans

Conventional home loans are simply mortgages that are not insured or guaranteed by the federal government. There are two types of conventional loans, conforming and non-conforming. Conforming loans abide by guidelines set by the government-sponsored entities Fannie Mae or Freddie Mac.Non-conforming loans abide only by the guidelines set by the lending institution. This is an important distinction because with the backing of Fannie Mae and Freddie Mac, lenders can offer conventional loans with more competitive interest rates and down payments as low as 3%.

2. Federal Housing Administration

In a Federal Housing Administration mortgage, the FHA insures the home loan. This offers the lender some protection since they cannot lose money if you were to default on your mortgage. Because of this, these loans often require lower down payments and closing costs than conventional loans and thus can be a great option for first time homebuyers. You will need a decent credit score to qualify for an FHA loan with a good interest rate.

3. U.S. Department of Veteran Affairs

If you are an active-duty military member, a veteran, or a surviving spouse, The U.S. Department of Veteran Affairs (VA)  will guarantee part of your mortgage. This makes it possible for the lenders to offer special mortgage features. Most namely, there is no minimum credit score required to qualify, there is no down payment, private mortgage interest is not required, and interest rates are competitive.

4. U.S. Department of Agriculture

U.S. Department of Agriculture (USDA) also has a homebuyer assistance program. This program focuses on homes in certain rural areas. If you are considering buying a home in a rural area, you should look into this option. The property does not have to be a farm to qualify. The USDA guarantees the loan, which helps allow for no down payment. These loan payments are also fixed, which means that your rate can not increase if mortgage rates increase in the future.

5. Local Grants and Programs

In addition to all of the federal loan programs, many cities and states also offer their own first time home buyer programs that often have below-market mortgage rates, as well as down payment or closing cost assistance programs.

Florida First Time Home Buyer Programs:

• There is a Florida First-Time Homebuyer Program with 30-year fixed rate loans through participating lenders.
• Florida First Time Home Buyers can also take advantage of the Local SHIP Program, which enables low to moderate income home buyers to access funds from their local country for down payments and closing costs.
• Florida home buyers should also be aware that there is a Mortgage Credit Certificate Program which allows buyers to claim up to 50% of their first mortgage interest (up to $2,000) each year as a tax credit. 
• Miami/Dade offers their own mortgage assistance program with below-market mortgage rates. So does Broward county.

When you apply for a loan, your approval, as well as your loan rate will depend on a variety of factors. Your credit score and your income level have an impact in these decisions. To determine your interest rate, the two calculations are taken heavily into consideration:

• Loan-To-Value Ratio = Mortgage Amount / Appraised Value of the Property. This is basically a risk assessment of the loan based on the asset value and the purchase price. The higher the LTV, the higher the risk.
• Debt-Service Coverage Ratio = Net Operating Income / Total Debt Service. This is basically the measure of cash flow available to pay debt obligations.

If you just starting to look into first time home buyer programs, feel free to reach out to our experienced agents for advice, and so that we can keep an eye out for your dream home.