Buying that first house is a big achievement. Few things in life can rival that feeling of having secured a decent and comfortable home for yourself and your family. However, you do need to spend quite a bit of money before getting there.
Many first-time homebuyers, in particular, often need some support to pay for a home mortgage. That’s where first-time homebuyer programs come into play. A number of options are available via the California Housing Finance Agency (CalHFA). Here’s a quick look at some of them.
Federal Housing Administration (FHA) loan
For the majority who are interested in signing up for these first-time home buyer programs in California, an FHA-backed loan is a popular option. As a 30-year fixed mortgage loan, it’s offered by most leading lenders throughout the state.
It’s particularly ideal for those with low credit scores but who are still aiming to make low down payments. A 3.5% down payment is possible with a FICO 620+. Most lenders will insure borrowers who are at 580 but will usually ask for a higher down payment of 10%. In addition, this type of loan requires a debt-to-income ratio (DTI) of 45% or less.
Department of Veteran Affairs (VA) loan
Active military personnel, veterans, and their spouses can apply for this type of mortgage loan. VA loans also run at 30-year fixed rates, but with no down payment. Expect to see lower rates than what the market normally offers.
To be eligible, military personnel must have served for six months or more. While there is no required credit score, lenders often prefer giving out VA-backed loans to those with a credit score of at least 620. DTI requirement is at 41% or lower.
US Department of Agriculture (USDA) loan
For first-time rural and suburban home buyers, a USDA loan may be the ideal option. While there is no down payment required, potential borrowers with less than 640 credit scores need to undergo stricter processes.
This 30-year fixed loan does not require mortgage insurance. However, some lenders will ask for upfront and annual fees instead. Additionally, you need to coordinate with CalFHA to make sure the house you’re eyeing can be financed through a USDA loan.
Since it’s not backed up by the federal government, conventional loans are offered directly through banks and credit unions. As a result, loan requirements are usually more stringent.
A FICO 640 or higher is the standard for this type of loan and requires a 45% or less DTI. If you go through CalHFA, you may get exceptionally low interest rates for a loan term of 30 years.
There are some conventional loans that have a federal guarantee. These are mortgages that abide by requirements set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation — more commonly known as Fannie Mae and Freddie Mac respectively. Both government bodies allow for a down payment that can go as low as 3%.
Talk to The Peninsula Real Estate Group today
Need a Realtor in Carmel, CA, to help you select the best home loan option? Don’t hesitate to reach out to our team of seasoned real estate agents. Call us at 831.595.5045 or send us an email at info(at)ThePeninsulaGroup(dotted)com.