If you qualify for a Fannie Mae or Freddie Mac loan, you will be required to pay private mortgage insurance if you make less than a 20% down payment. After you’ve accumulated 20% equity in your house, you can cancel your PMI.
FHA financing
A Federal Housing Administration (FHA)-backed mortgage could be an excellent option for first-time homeowners (and repeat buyers) with less-than-perfect credit and limited financial reserves. Borrowing requirements for FHA loans are less strict than those for conventional loans, with a minimum credit score of 500 required to qualify. The disadvantage is that you must pay mortgage insurance fees for the life of the loan unless you put down at least 10%, in which case you can cancel MIP after 11 years.
You may be eligible if you meet the following criteria:
You have a credit score of 500-579 and a 10% down payment.
You have a credit score of 580 and a down payment of 3.5 percent.
You’re purchasing a one- to four-family home as your primary dwelling.
HUD’s Good Neighbor Next Door initiative
Though it is not necessarily limited to first-time homebuyers, the Department of Housing and Urban Development’s (HUD) Good Neighbor Next Door program can help you save up to 50% off the list price of a property. Borrowers must acquire a home in an area selected for revitalization to supporting certain communities.
You may be qualified if you are an educator, emergency medical technician, fireman, or law enforcement officer.
You agree to stay in the house for at least three years.
You agree to take out a silent second mortgage in the amount of the home price reduction.
A VA loan
Active-duty military personnel, veterans, and eligible spouses may be eligible for a loan guaranteed by the United States Department of Veterans Affairs. The benefit here is that you will not be required to make a down payment to qualify for a VA loan. VA borrowers are also exempt from paying mortgage insurance premiums.
In addition, the VA provides funding for modified homes. These can assist you in purchasing an adapted home or making an existing home more accessible to accommodate a service-related handicap.
You may be eligible if you meet the following criteria:
You are a member of the military, a veteran, or an eligible spouse.
You have a VA Certificate of Eligibility.
You have a credit score of at least 620, which VA-approved lenders normally require.