If you’re buying a home and you’ve never bought a home before, that makes you a first-time home buyer, right? Yes, that’s true, but the U.S. Listen, defining first-time home buyer sounds simple. And those savings only go up if you buy a more expensive home. Plus, the payment on the conventional loan is $600 less-leaving you a lot more money in your budget for other expenses and financial goals. So a conventional loan with a 20% down payment could save you nearly $ 5 0,000 over the life of the loan. None (You don’t need private mortgage insurance if you put 20% down.) To keep things simple, we left out property tax, homeowners insurance and HOA dues.ġ5-Year Fixed-Rate Loan for $300,000 House We used our mortgage calculator to show the difference between a 15-year fixed-rate conventional loan and a 15-year FHA loan for a house priced at $300,000. So to help you wrap your head around the differences between the cost of an FHA loan and a 15-year conventional loan, here’s a side-by-side comparison of the costs for both. We’ve thrown around a lot of percentages and numbers. Let’s take a look at how the cost of first-time home-buyer loans compares to a conventional loan. This will get you a better interest rate, allow you to build equity, and get your home paid off faster. Since all of these first-time home-buyer programs have additional costs that don’t help you pay off your home, we recommend avoiding these types of programs and choosing a 15-year fixed-rate conventional loan. A first-time home-buyer grant does not have to be repaid.īe careful though: These types of DPA loans and grants could get you stuck living in a home you can’t afford with little or no equity-which could be a big problem when you go to sell your house. These programs offer low- or no-interest loans to help people with lower incomes afford a down payment.Ī few larger cities across the country offer grant money as part of a no down payment program for first-time home buyers with low incomes in minority neighborhoods. 3 Just like with FHA and USDA loans, those fees add up pretty quickly.Īs you get more serious about buying a home, you might hear about down payment assistance (DPA) programs offered by some cities and states. They include fees up to 2.3% of the purchase price. Department of Veterans Affairs (VA) loans are for military veterans and are similar to USDA loans. USDA loans require no down payment, but they also include additional premiums with an initial fee of 1% and a 0.35% annual fee.

United States Department of Agriculture (USDA) loans are a type of government-backed loan for people who live in rural areas. 1So, an FHA loan can cost you thousands of extra dollars that don’t go toward paying off your mortgage.

They require you to pay a 1.75% mortgage insurance premium (MIP) up front and an annual premium between 0.45% and 1.05% for the life of the loan. FHA loans are the most popular first-time home-buyer program.įHA loans seem great at first, but they have some sneaky fees. These loans are designed for people with low down payments (as little as 3.5%) and not-so-great credit. The Federal Housing Authority (FHA) offers government-backed loans to first-time home buyers called FHA loans. Let’s take a quick look at how they work. Types of First-Time Home-Buyer Programs, Loans and Grantsįirst-time home purchasers have several programs available to them, but the most popular are: FHA loans, USDA loans, VA loans and down payment assistance loans. Let’s start by looking at the different first-time home-buyer programs out there. In this first-time home buyer’s guide, we’ll walk you through everything you need to know to make your journey into homeownership a success. and probably have lots of questions: Are there first-time home-buyer programs? What is the buying process for a first-time home buyer?ĭon’t worry. You might feel anxious or excited about buying a home. A house is the biggest purchase you’ll ever make in your life (unless you go way overboard buying modern art).

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